October 10, 1973
District economic activity remains strong, and despite difficulties obtaining materials and labor, businessmen are quite optimistic about the future. District retail sales have not yet let up, and consumer installment credit has risen at a substantial rate. Furthermore, district retailers look for continued sales gains. Despite threats of drought and other growing season hazards, the outlook is for record crops in the district this fall.
Although district businessmen did not report any softening in district business activity, material shortages are restricting expansion. A director whose firm manufactures plastic pipe indicated, for example, that plastic resins are in very short supply; he expected the problem to be critical for the next several months. In addition, delivery times on steel products have stretched out considerably. Another director from the upper peninsula of Michigan disclosed that material shortages exist in his area and many businessmen are having to turn to substitute materials. A Minneapolis/St. Paul area director revealed that Twin Cities area manufacturers are having difficulty obtaining various raw materials—wood, steel, and fuel—and many manufacturers are encountering capacity problems. A large Twin Cities area retailer reported that merchandise is available, but delivery times are lengthening. A South Dakota director disclosed that farm implements remain difficult to obtain and a critical fertilizer shortage exists for the fall planting. A Montana director stated that his area's retail sales would be stronger if merchandise was available and reported that agricultural steel products, fertilizer, and farm machinery are in short supply.
Not only are materials difficult to obtain, but district labor markets were generally described by bank directors as tight. A shortage of construction workers was reported in the Billings area, and the hiring of employees for the service industries was considered more difficult than a year ago. A Minnesota director disclosed that general laborers are in short supply and reported that these workers are quitting jobs with increasing frequency. In addition, fewer skilled workers are looking for jobs in Minnesota. In the upper peninsula of Michigan, on the other hand, an ample supply of general laborers exists, but skilled workers are difficult to hire. One Twin Cities area director revealed that trained, experienced employees are not to be found, while another stated that the current labor conditions are tight but not unmanageable. A South Dakota director disclosed that labor market conditions are tight in his area, especially for farm and construction workers. Directors from Montana and North Dakota, however, indicated no shortage of agricultural workers in their areas.
No significant letup in district consumer spending has yet to occur, and district retailers are optimistic about future sales. Major Ninth District department/discount stores surveyed by this bank reported summer sales exceeded year-earlier levels by as much as 10 percent, although a few stores noted some slackening toward the end of the summer. Several retailers also revealed that about half of their recent sales gains stemmed from price increases. Most major department/discount stores, particularly those outside the Twin Cities, expect to surpass last year's record sales this holiday season.
District motor vehicle sales rose strongly throughout the summer, departing from the usual seasonal pattern. Small cars and trucks were the biggest sellers. The gasoline shortage was generally credited with spurring smaller car sales, while the 20 to 50 percent increases in truck sales were attributed to sharply higher farm income. District car dealers are enthusiastic about their future sales prospects and do not feel that the exceptionally high 1973 sales have cut deeply into their 1974 sales potential.
Based on data provided by a selected panel of district member banks, consumer installment credit extended by district banks this summer continued to rise at a rapid rate. A survey of nonbank consumer finance institutions indicated that business was unchanged to substantially higher compared to a year ago. Commercial banks and consumer finance companies reported raising consumer interest rates on new car loans by one-half to one percent recently, but otherwise terms for consumer installment credit have remained relatively unchanged over the past year.
As the district enters the final phase of the harvest season, the outlook is for record crops in 1973, despite threats of drought and other growing season hazards. The wheat and other small grain harvest is completed. The district produced 491 million bushels of wheat this year, up 17 percent from 1972 and 19 percent from the most recent five-year average. The corn and soybean harvests are just under way, and record outputs are almost a sure thing. District corn production, estimated at 667 million bushels on September 1, is up 8 percent from a year ago, 24 percent from the five-year average, and is the largest amount ever produced. The anticipated gain in soybean production is even greater. Total output of beans is expected to reach 175 million bushels, up 28 percent from last year and 39 percent from the five-year average.