Business activity in the Eighth Federal Reserve District continues generally upward. Businessmen indicated some slackening in the rate of growth of consumer spending while business investment and government spending remains strong. Employment is generally unchanged in the District. The unemployment rate remains stable and relatively low. Construction activity is mixed, with home building down and commercial construction continuing strong. Crop prospects have improved somewhat due to recent heavy rainfall in the District.

Growth of consumer demand has slackened in recent weeks. Some major retailers report sluggish sales in August, and manufacturers of consumer items such as clothing, appliances, shoes, and household furnishings report some slackening demand. Automobile sales, however, have picked up considerably from earlier in the year, and capital goods sales continue strongly upward. This strength in automobiles may partly reflect special factors such as seasonal price cuts, the announcement of large price increases on 1975 models, and apprehension attributable to the potential difficulty of obtaining unleaded gasoline for the new models.

Manufacturing activity remains strong in several industries such as steel, aluminum, and machine and other capital goods. Some of these industries continue to report large order backlogs and long delays in delivery of component items. One machine manufacturer reported an order backlog of two years, and delivery delays of nine months or more was commonly reported. However, manufacturing of consumer durables, especially housing-related items, has slowed. For example, a representative of a home furnishing manufacturer reported sales increased only 4 percent in 1974.

Construction activity also follows a divergent pattern. Housing permits and starts in the District are down considerably from last year. In some cases declines of 40 percent or more were reported. Government and commercial construction, however, continues fairly strong. One exception was road building which was reported to be down, partially reflecting the near completion of the Interstate Highway System.

Employment in the Eighth District remains at a relatively high level. Total employment has remained virtually unchanged since last year, compared with rapid growth in the previous two years. The unemployment rate has risen from year-ago levels, but has remained stable for the past six months and generally remains below the national rate. Reports of layoffs were heard in manufacturing employment, particularly in housing-related industries. Also strike activity in the District has been at much higher levels in recent months than a year ago.

Time and demand deposits at commercial banks have continued to increase in the District in recent weeks, but savings and loan associations in St. Louis have suffered a net withdrawal of deposits. Both types of institutions reported a movement toward higher yielding time deposits and a decline in passbook savings accounts. State usury laws, particularly in Missouri, have virtually stopped home financing loans, thus contributing to the housing slowdown in the area. Savings and loan associations in the St. Louis area report that they are making local loans only on homes built by contractors whom they service with construction loans. A special legislative session is currently being contemplated in Missouri to consider the relaxation of the State's usury law.

The agricultural situation in the District has improved as a result of heavy rainfall recently. Crop yields, particularly soybeans and late corn, and pastures may be somewhat improved. Some parts of the District, particularly the eastern sections where the drought was not as severe, expect below normal yields from recent years; but due to the larger acreage planted, crop production may still be slightly above that of last year. The prospects for cotton and rice crops are generally good, and cow-calf operations have improved due to the favorable prospects for fall pastures.