Retail sales at department stores in the Tenth District continue to hold up, although managers are still more unsure than usual about the months ahead. Disaffection with the big car is reemphasized by the extension of the closedown of Kansas City's Buick-Oldsmobile-Pontiac assembly plant. Power boat dealers, too, are feeling the energy crunch. Farm income is suffering a setback with the recent decline in farm prices, especially the prices of livestock. The consumer is beginning to benefit as meat prices come down, but a reduced supply of feed cattle in the months ahead may soon reverse this downturn. Business loan demand has been unseasonally strong, and deposits have increased apace. Oil companies are among those businesses largely responsible for the rising demand for loans, while deposit growth is largely in consumer time deposits and large certificates of deposit.

Department store executives in metropolitan areas throughout the District report that, while business is not booming, sales do show strength. In most stores contacted, sales are up more than prices over last year. Several managers emphasized that it is still too early to gauge sales trends. They are looking to Easter sales as the first solid indicator of the consumers' buying mood. For those who would make one, the current best guess as to the outlook for department stores is for rising volume in the upcoming months, assuming gasoline supplies remain adequate to support shopping. Contrary to fears some months ago, inventory levels have been relatively easy to maintain, and currently are considered adequate for spring. Most managers note no significant change in the departmental mix of their sales, although sales of television sets and stereos are "outstanding" at one store, and a luxury retailer is enjoying extremely strong demand for silver and fine jewelry. Some declining interest in department store lines of outdoor recreation and leisure goods is observable, although the season still is young.

Boat dealers already are convinced that they will suffer in 1974. One describes sales so far as "terrible". With the exception of big luxury cruisers, power boats are not selling well at all. A major distributor of boats in the District says that bank refusals to finance the inventories of boat retailers last fall has further depressed sales by limiting stocks. Consumer concern about the gasoline shortage is substantiated by the increasing popularity of canoes and sailboats. Another facet of spending patterns is indicated by rising sales of alcoholic beverages reported by two major retail chains in the Kansas City area.

Following a 1 1/2 percent gain during the month ended February 15, farm prices have since experienced a sharp reversal, especially for livestock. Beef prices are down almost 20 percent from their February level, and hog prices have also fallen somewhat. Although meat supplies have risen, reflecting the settlement of the truckers' strike and the shipment of heavier animals, prices at the farm level have slipped more than anticipated. One reason rests with consumer demand, which has remained quite sluggish as food merchants have widened their profit margins rather than pass on savings to consumers. Moreover, given the current plight of the cattle industry, producers have been sending more cows and bulls to slaughter, which tends to depress prices because the meat is of lower quality. Very recently, however, retail meat prices have begun to reflect developments at the farm level. Several Kansas City merchants reported that they have lowered beef prices and are now beginning to feature sales and engage in more advertising. Generally, most of them expect some further price moderation over the next few weeks. However, if feed cattle marketings decline in the second quarter as expected, any downturn in retail beef prices is likely to be short-lived.

Interviews with larger Tenth District member banks indicate that business loan demand has been unseasonally strong in recent weeks. Most banks report heavy borrowings by both national and local firms, although a few banks have experienced some softening in borrowing by national firms, which are felt to be switching to the commercial paper market. Even though shortages of pipe are reported to have limited operations of oil and oil-related businesses, banks in Tulsa and Oklahoma City continue to experience especially strong loan demand by these firms. Deposit inflows have generally been sufficient to satisfy loan demand. In some cases, several banks have found themselves with a surplus of loanable funds and have begun to increase their holdings of state and local securities, after having permitted them to run down for a period of time. One source of the deposit strength has been in consumer-type time deposits, inflows of which have been attributed to the drop in Treasury bill rates that occurred in late January and February. Certificates of deposit have also increased in recent weeks, as several banks are continuing to rely on this instrument to augment their supply of loanable funds.