Business activity in the Eighth Federal Reserve District generally continues strong, although selected areas have shown weakness in recent weeks. Shortages of materials remain a major problem. Many capital goods firms still report large backlogs of orders. Retail sales, except for automobiles, remain firm. Farmers are responding to higher commodity prices by planting larger crop acreages for a number of key crops, despite increased cost and difficulty in obtaining key inputs such as fuel and fertilizers.

Manufacturing activity in the District generally continues at a high level, with the notable exception of the automobile industry. Most of the firms interviewed, including representatives of the capital goods, chemicals, paper, and steel industries, report operations at capacity levels and sizable backlogs of unfilled orders. Hence, there is great demand for new capacity in most industries, and the large expansion plans of major firms remain generally unchanged, despite the slowdown in the automobile sector and the numerous forecasts of a recession this year.

"Shortages" of raw materials and semi-finished goods remain a major concern of many businessmen. Contributing to the "shortages have been some stockpiling and panic buying, and more recently the problem has been aggravated by the truckers' strike, During the last few days, however, trucking activity appears to be returning to normal.

Retail sales are reported as generally good, except for automobiles which have been down substantially in recent months. Department store sales are reported to be quite strong with sizable percentage increases this January compared with a year ago. A few car dealers have announced plans to close their dealerships while others feel that the worst is over. Those selling small cars were generally back on the profit side of the ledger in January, after experiencing losses in December.

A review of employment growth rates in the Central Mississippi Valley (CMV) reveals a somewhat different growth pattern for the large SMSA's as compared to the CMV states. In all five of the CMV states, both total and payroll employment growth slowed in 1973, after experiencing rapid growth in 1972. On the other hand, employment in several of the SMSA's in the CMV increased at more rapid rates in 1973 than in the previous year. Apparently the rural and smaller population centers approached full employment in 1972 resulting in a deceleration of growth in 1973, while in many of the metropolitan areas full employment was not approached until late 1973.

Savings deposit growth at commercial banks and savings and loan associations was reported at a rather slow pace in recent weeks. Savings and loan associations offering 7 1/2 percent rates on CD's generally reported sizable net inflows of savings, while those not offering these higher rates were experiencing no change or net outflows. These latter institutions felt that 7 1/2 percent money was unprofitable at rates they could obtain on loans. For example, in Missouri the usury law restricts interest rates to 8 percent (with points, the effective rate is now in the 8 1/4 to 8 3/4 percent range). In the past year, with the high rate of interest obtainable in the Federal funds market and the constraints of usury laws, many associations have been placing sizable amounts of funds into the Federal funds market and the national mortgage market. This has further contributed to the decline in construction activity in some parts of the District.

Farmers in the District are expected to increase their acreage of cotton, corn, and rice this year in response to sharply higher prices. Of concern to some farmers, however, is their ability to obtain scarce farm inputs such as fuel and fertilizer at "reasonable" price levels.