Economic activity In the Eighth Federal Reserve District remains generally strong. Manufacturing activity and retail sales continue to exhibit strength, and employment remains at a high level. However, the automobile, housing, and housing-related industries are experiencing a slackened demand for their products. Growth of time and saving deposits has slowed, especially at commercial banks, compared to the rapid growth earlier in the year, and loan demand is somewhat less strong than earlier.

Manufacturing activity generally continues at a rapid pace in the District. Firms in the steel, chemical, paper, and capital goods industries report production at capacity levels. Many firms in these industries also continue to report order backlogs, with the situation only "modestly improved" from recent months, despite large price increases. Representatives of some firms noted the necessity of large price increases to provide incentive for financing increases in capacity.

The volume of retail sales in the District continues to be "better-than-expected." A considerable part of the sales volume appears to be the result of increased prices rather than number of units sold.

Employment in the District remains in a generally "tight" condition, with the unemployment rate for most SMSA's and states well below the national average. Several areas, especially smaller cities and rural areas, even report labor "shortages." Reports of factory lay-offs have been very scattered, except for the automobile and construction industries. Some housing-related manufacturing firms, however, anticipate lay-offs if the housing situation does not turn around soon.

Residential construction activity in the District is considerably below the level of a year ago. Housing permits issued in St. Louis County in the first six months of this year, for example, were less than half the number issued in the first half of 1973. The low usury ceilings, particularly in Missouri, have significantly contributed to the housing slowdown. With single and multi-family unit construction both down, apartment building occupancy is reported to be nearing capacity levels. As a result, apartment rents are beginning to increase rapidly.

Demand for bank credit has been strong but considerably less robust than earlier in the spring. Business loans have continued to increase in the St. Louis area in recent weeks while in many of the other SMSA's in the District this demand has slackened. Smaller banks are apparently enjoying "good times", reflecting the large deposit inflows based primarily on the higher incomes of farmers in 1973, and the high returns available in the Federal funds market.

Growth of total time and saving deposits at commercial banks was at a somewhat slower rate in recent weeks than earlier in the year. However, in the first six months of 1974, total time and saving deposits at commercial banks in the District increased considerably more rapidly than in the first half of 1973, with gains mostly in higher-yielding time certificates. On the other hand, net inflows into savings and loan associations in St. Louis for the first half of this year were only about one-half the net inflows for the comparable period last year.