February 7, 1973
The Eighth District economy continued strongly upward in January according to a selected group of businessmen. Retail sales were well ahead of year-ago levels. Manufacturing output and sales continued to expand. Rising bullishness in the capital goods industries was especially noticeable. Construction generally remained at a high level for the winter season. Employment rose moderately, and businessmen reported very tight labor markets over most of the District. Demand for credit continued to outpace the growth of loanable funds causing upward pressure on interest rates. As a result of the January freeze, some farmers were able to resume crop harvesting, but many will experience substantial losses because of the poor harvesting season.
Retail sales in January were well above year-ago levels throughout the District. Leading department stores, however, indicated that sales on a seasonally adjusted basis have tended to level off since December.
Manufacturing continued strongly upward in January. A major chemical firm reported that its sales were 10 percent ahead of January a year ago, and that sales of plastics and related products were up 12 to 15 percent. Sales of paint, coatings, and wallcoverings were also up sharply. Many firms cannot obtain the quantity and quality of raw materials desired. Pulpwood and semifinished products for the paper and paperboard industries were reported in short supply and being rationed. Similar shortages are also in prospect for light crude oil, a raw material for many chemical products.
Although sluggish until recent months, reports indicated that the capital goods industry is beginning to boom. Sales of electrical equipment for manufacturing firms and welding and cutting equipment for both domestic use and for export were up sharply.
Business investment plans are apparently being revised upward as a result of the rising levels of sales and orders. Whereas last year few firms reported plans for new capital investment, many now report plans for new plants and plant expansion.
While construction remained at a generally high level over most of the District, it was quite spotty, varying from very high to low, depending on the availability of building supplies and weather conditions. Residential building was reported at a relatively high level in all the major District cities. All types of construction was booming in northeast Mississippi, but unfavorable weather and material shortages have brought construction to a standstill in southeast Arkansas.
Employment was increasing throughout the District. Most manufacturing firms reported moderate increases in production workers, and some report additions for research and development purposes. The labor market remained very tight over most of the District. The unemployment rate in the District is generally well below the national average with the exception of St. Louis and Fort Smith. Businessmen reported an especially tight labor market in western Tennessee, and that unemployment was virtually nonexistent in southern Kentucky.
The District agricultural situation varies from very good to very bad depending on local weather conditions during harvest. Farmers were unable to harvest a sizable percent of their cotton and soybean crops in southeast Missouri and northwest Arkansas and may face major losses. In most other parts of the District, excellent crops have been harvested and sold at high prices.
Credit demand in the Eighth District has increased. Banks reported rising interest rates on all types of loans. Savings and loan associations reported that inflows of savings had tapered off. Interest rates charged by savings and loan associations remained stable in January, although rates are expected to rise during the year.