August 9, 1972
The trend in business activity in the Eighth District continues moderately up, according to a selected group of businessmen. Factory output has expanded further in recent weeks. Construction activity remains unchanged at a relatively high plateau. Retail sales have tended to level off in the past two months following sharp gains during the first five months of the year. Unemployment remains relatively high in some parts of the District, but firms are less reluctant to add employees than they were in late 1971 and early this year. Savings flows into financial firms and demand for longer-term credit continues to grow at a rapid pace, and little change has occurred in interest rates on mortgages. The farm sector remains optimistic as to both price and production expectations.
Output from the District's factories continues to expand on a wide front. Reports indicate that output of steel, appliances, machine tools, chemicals, and a number of soft goods is on the upswing. A major appliance manufacturer reported that business was up considerably from a year ago, largely reflecting sales for new residential building. The outlook for steel is reported to be the most promising in recent years. Machine tool orders have been on the upswing for several months, and output of industrial chemicals has in recent weeks resumed an uptrend.
Construction in the District continues at a relatively high plateau which was reached in late 1971. Residential construction activity is at a high level throughout the District. Most of the commercial and industrial expansion, however, has taken place outside the St. Louis metropolitan area. Retail sales have apparently leveled off somewhat in the summer months, although they rose rapidly throughout the District with the exception of the St. Louis area in the early part of the year. Major department stores in St. Louis report that sales have changed little in recent months and are only slightly above last year's levels.
Profits are up somewhat at most District firms, and the outlook toward investment is improving. Nevertheless, most managers still feel that costs are excessive and they are hopeful of widening the profit margin before initiating major expansion programs.
With the improvement in profits, a number of firms reported a moderate increase in their work force. The chemical, electrical, and textile industries report some small employment gains. Some metal fabricating firms report that their employees are working overtime. Numerous new manufacturing plants in the smaller centers in Arkansas, Mississippi, and Tennessee have added to the District's total payroll employment. Unemployment, however, still remains relatively high in part of southern Indiana and in St. Louis.
While short-term interest rates have been edging up, little change in the mortgage rates has been observed. Representatives of financial firms believe that short-term rates will rise further before the end of the year. Savings, however, continue to flow into financial institutions at a fast pace. PME Savings and Loan Association reported a record gain in savings in July. Rates on mortgage loans, however, remain unchanged reflecting the high demand for such funds.
The agricultural outlook remains optimistic throughout most of the District. Crop conditions are good with the exception of small pockets that have suffered from lack of rainfall. Prices are sufficiently high to provide profitable returns to efficient producers of most farm products.