Business activity in the Eighth Federal Reserve District has weakened further in recent weeks. Consumer spending on appliances, automobiles, and some other items has declined considerably, resulting in cutbacks in manufacturing activity and employment. The current slowdown, first observed in the automobile and residential construction industries, has recently spread to a large number of activities. However, businessmen representing several sectors of the economy including capital goods, steel, commercial construction, industrial and farm chemicals, and pharmaceuticals report a continuing high level of activity. The reports indicate, however, that activity in some of these areas may be weakening.

Consumer spending has slowed further in recent weeks. Retailers report considerable slackening in sales of durable items such as automobiles, television sets, and electrical home appliances. In addition, sales of shoes and some clothing items are reported to be off on a seasonally adjusted basis.

Manufacturing activity has declined in several areas and the businessmen interviewed expect some further deterioration. Most notable is the sharp curtailment of operations at automobile assembly plants. Numerous layoffs have occurred in all such plants in the Eighth District. Slowdowns have also occurred in the manufacture of a large number of other items such as television sets, electrical appliances, synthetic fibers and plastics, home furnishings, and paper and boxboard products. One result of these slowdowns has been the rapid disappearance of material shortages. Some manufacturers believe that part of the precipitous decline now occurring in factory orders for some basic products such as plastics and synthetic fibers reflects the adjustments following the shortages and inventory buildup of these items in the early part of the year. Hence, a decline in inventory demand, coupled with some decline in final demand, has led to major adjustments in production.

In contrast to the sharply reduced activity in these industries, capital equipment manufacturing remains relatively strong. Some postponements and cancellations have been reported, but no major turnaround has occurred. Steel manufacturing also remains fairly strong although reports indicate steel producers in the U. S. are beginning to face increased competition from cheaper imports. Industrial and farm chemicals are also holding up well. Demand for fertilizer continues up and some further price increases are expected here.

Residential construction in the District remains in a deep slump. Commercial construction has held up considerably better but it is off from the levels of a year ago. Low usury ceilings, especially in Missouri, have hampered the flow of funds into residential construction. A special session of the Missouri legislature is reviewing the usury laws and businessmen report that the prospects are good for raising the ceilings.

The cutbacks in manufacturing activity have led to employment declines and increased unemployment in the District. Although some areas continue to maintain high levels of employment, others, such as St. Louis and Louisville, where the hard-hit industries are concentrated, are beginning to experience considerable unemployment. So far the major employment cutbacks have occurred in construction, motor vehicles and appliances. However, reports of other plant closings, layoffs, lengthening of the holiday season, or shortening of the work week were reported by representatives of several other industries including shoe, paper, electric motor, paint, plastic, and fiber manufacturers.

Saving flows into financial intermediaries in the District are beginning to increase. Some savings and loan associations report larger net inflows for November than in earlier months and passbook savings at large commercial banks have increased slightly, reversing a downward trend in the summer. On the other hand, "other time deposits" at commercial banks have declined somewhat in recent weeks after a gradual increase during the summer and early fall.