October 21, 1975
Business activity in the Eighth District continues to increase somewhat according to recent reports of area businessmen. The recovery, although relatively slow, appears to be fairly broadly based. Manufacturing continues to expand; several firms report production near capacity levels. Consumer durables production is reported to be up from the rate of earlier months. Retail sales are increasing somewhat on a seasonally adjusted basis. Residential construction is increasing, but nonresidential construction remains generally at a low ebb. Savings inflows at thrift institutions have slowed considerably in recent months, and mortgage rates have been rising. Commercial and industrial loans at large district banks have increased somewhat in recent weeks.
Manufacturing continues the improvement noted in previous months, although activity is still well below year-ago levels. Respondents report an upturn in production of consumer durables. Appliance sales are also up, spurred by increased residential construction. St. Louis area manufacturers of clothing, lubrication and welding equipment, and materials used in construction report production at near capacity levels; some have recently added additional shifts.
Employment has increased somewhat, according to the latest available data. In some states and metropolitan areas, however, there has been little or no gain. A similarly mixed picture is presented by unemployment; but the rate of unemployment in the St. Louis area has declined somewhat from the 9 percent peak in the summer.
Retail sales are increasing, with many firms indicating the real volume of sales at about last year's rate following a seasonally adjusted low near the end of the year. Automobile sales are reported to be less than in the same period last year, but new model sales are reported to be off to a good start. Sales of foreign cars appear especially strong.
In the agricultural sector, prices of meat and feed grains remain relatively high. Demand for pork is expected to remain relatively strong and pork prices relatively high through most of the next year, but some short-term weakness is expected in broiler prices. Most of the Kentucky tobacco crop was cut and housed early because of drought, but the crop is reported to be good. A good soybean crop also appears in prospect, but the cotton crop in west Tennessee is characterized as a "disaster."
Many parts of the district report rising activity in residential construction, but little or no recovery in nonresidential construction. The apartment vacancy rate in the St. Louis area is reported to have fallen from 14 percent last year to only 2 percent now. The industry representatives believe that such a low vacancy rate will provide incentive for a sharp increase in construction of new apartments.
Mortgage rates in the district have risen and lenders anticipate further increases. Withdrawals from passbook accounts are reported at both thrift institutions and commercial banks. Thrifts report a new inflow of funds, although not at the rapid rate experienced in earlier months. Total time deposits at large district banks have shown little change over the last few months. Total loans at these large banks have increased somewhat in recent weeks, paced by increases in commercial and industrial loans. This increased loan demand appears to be more from intermediate-sized firms than from large ones. Some banks report rising credit demands for plant expansion and for building inventories. Consumer installment loans have shown little change in recent weeks.