Economic activity in the Eighth Federal Reserve District has continued moderately upward in recent weeks. Retail sales have increased on a seasonally adjusted basis; and manufacturing activity, with the exception of automobiles, is generally at full capacity. Construction is at a standstill in St. Louis as a result of a strike, and residential construction has slowed throughout the District. Total employment is down slightly, but the unemployment rate is relatively low. Inflation and supply shortages remain a major concern of businessmen in the area. Bankers report that growth of loan demand has slowed and bankruptcies are up. Farming conditions are mixed. Livestock feeders are losing money, but most crop prices remain at profitable levels for producers.

Retail sales in the Eighth Federal Reserve District have generally continued upward in recent weeks. A representative of a major St. Louis department store reported that sales of all major lines except women's fashions had increased on a seasonally adjusted basis. Sales increases were also reported by businessmen in Arkansas, Mississippi, and West Tennessee; however, some slowdown in the rate of consumer purchases may have occurred in Louisville. Sales of appliances, however, were reported to be holding up surprisingly well in Louisville and St. Louis, in view of the decline in housing construction.

Manufacturing activity in the District is continuing at full capacity with the exception of automobile production. Two of the major automobile assembly plants in the St. Louis area have laid off one shift each, or roughly one-third of their work force, and a third plant has laid off a few workers. Most other manufacturers report that backlogs of orders still exist for most types of capital equipment. There has been some slowing in demand for certain types of appliances, primarily of the gas burning type; however, the decline was more than offset by gains in other appliance sales. Demand for home freezers is especially high, reflecting the larger number of home gardens in urban areas and plans for freezing the vegetable crop. With the slower rate of home building and automobile output, demand for plastics and fibers is down; and even though raw material sources for such products, largely petroleum, have become scarcer, the upward price pressures have been less than expected.

Residential construction has slowed in most of the District, and, in St. Louis, it has come to a standstill as a result of a strike by the construction workers. Single-family housing is also reported to be at a standstill in Memphis and falling off in Louisville and Little Rock.

Commercial construction is spotty. It has been halted by the strike in St. Louis, but in other parts of the District it varies from slow to moderate, being retarded in some communities by shortages of equipment and materials.

The latest available data indicate a slight decrease in total employment in most Eighth District states compared to the beginning of the year. The unemployment rate was unchanged in April from the previous month and remains below the national average of 5 percent. In Mississippi, Missouri, and Tennessee, the unemployment rate is below 4 percent. In the Eighth District SMSA's, it ranged from 2.7 percent in Little Rock to 5.7 percent in St. Louis.

Inflation remains a major concern of Eighth District businessmen. Suppliers of many items are reported to be wary of quoting a price of future delivery. A major manufacturer in Louisville reported that materials costs have skyrocketed, largely reflecting shortages in steel and plastics. A Louisville brewery representative reported that increased costs of supplies and inability to raise selling prices were major problems. He reported a 72-percent increase in the cost of barley malt since the first of the year and an 82-percent increase in the cost of corn since last year. A Little Rock businessman reported that roofing asphalt has risen 56 percent this year and that benzene has risen tenfold since 1973. Complaints of high fertilizer prices continue. An Arkansas businessman viewed with alarm our decision-making process which allows the money supply to increase while inflation is accelerating.

There were a number of comments, however, to the effect that the rate of inflation may be subsiding. A St. Louis businessman reported that a number of formerly scarce items were becoming more available and that people are beginning to back away from panic buying. An oil industry representative reported that the price of crude oil has fallen back from winter levels and that more gasoline has come on the market in the last two weeks. He expects a stabilization of gasoline prices this summer.

Loan demand at major Eighth District financial centers may have reached a plateau. Total loans at the major banks showed very little change from April to May. Demand deposits have continued sharply upward in recent weeks, but other deposits have remained fairly stable.

The savings and loan associations reported large inflows of funds; however, outflows were often greater than the inflows, as the 7 1/2-percent certificates are not being renewed. Holders of these certificates are investing their savings in higher-yielding assets. Bankers reported that bankruptcies and delinquencies are the highest in several years. Some bankers associate this problem with the labor stoppages, but delinquencies also seem to be a problem in areas that have not experienced severe strikes.

The agricultural situation varies from good to bad, depending on the type of farm production involved. All feeders of animals have lost money in recent weeks. Beef cattle feeders have probably suffered the worst losses. Some are believed to have lost as much as $100 per cow.

Crop planting got off to an excellent start in most of the District, but, in recent weeks, planting has been slowed because of excessive rainfall, especially in Illinois and Indiana. If farmers are further delayed in planting corn, they will be forced to switch to faster-maturing, lower-yielding varieties or to some other crop. Most crop prices remain favorable to producers, providing incentive for sizable output increases over the 1973 crop.