July 18, 1972
The uptrend in business activity continues in the Eighth Federal Reserve District but at a moderated pace, according to a sample of leading businessmen. Factory orders continue to expand, and a few firms have hired some additional help. An increasing number of firms report that output is approaching capacity levels and that plans are being made for plant expansion. Construction has apparently leveled off. Retail sales at major department stores have declined in recent weeks in contrast to a fairly strong uptrend from January through May.
Most manufacturing firms in the District report rising sales and production. Chemical firms, for example, report large increases in fiber and plastic sales in the second quarter of this year and some gain in industrial chemicals for the first time in more than a year. Defense plants and textile and electrical equipment manufacturers reported further gains in output and sales in the second quarter.
Output relative to capacity has been inching up for several quarters, and managements at most District firms are beginning to plan for increased investment. One of the largest manufacturing firms headquartered in the District reported that new investment had declined for two years, but that 1972 would be the low point as a major increase was planned for next year. A number of smaller firms also reported plans for investment in new plants and plant enlargement.
Although those surveyed reported employment as stable, their estimates of employee numbers reveal that employment has actually increased. Nevertheless, some areas of the District report a relatively high rate of unemployment. Included among such areas are Southern Indiana, with an unemployment rate ranging from 6 to 12 percent, and the inner-city portion of the St. Louis metropolitan area.
Construction remains high throughout most of the District, but it has apparently leveled off in recent weeks. Residential construction remains at a high rate throughout the District. Commercial construction is at a high rate in most of the District, except for the St. Louis area where such construction is at a lower rate, and an excess of office supply space is reported.
Major department stores in St. Louis report a sizable decline in sales during June. Part of the decline is attributed to cooler and drier than normal weather conditions. These conditions resulted in reduced sales of air conditioners, lawn mowers, and other garden equipment. Some pickup in sales is expected as soon as weather conditions return to normal.
Crop conditions in the Eighth District are generally good. There are a few areas where crops are suffering from drought, but such constitute only a small percent of the farming community. Corn production is expected to be down from the very large crop of last year, but soybean production should be well above year ago levels. The outlook for farm income is very good, with higher prices and a higher level of production in prospect.
Savings inflows into District savings and loan associations have continued strong in recent weeks, but time and savings deposit growth at commercial banks has tapered off, following very rapid gains earlier in the year. Loan demand at District member banks continues sharply up. Short-term interest rates have begun to rise, and long-term rates are expected to rise in the near future.