Beige Book Report: St Louis
December 10, 1975
Economic conditions in the Eighth Federal Reserve District continue to improve according to latest reports from area businessmen. However, the pace of the recovery is still described as moderate. Christmas sales have been at a brisk pace so far, and retailers are optimistic about continued strong sales. Automobile sales in the District appear to be keeping pace with the national upturn, and total sales are reported to be moving ahead of the production schedules. On the financial side, savings inflows have accelerated somewhat in recent weeks. Commercial banks, however, continue to report no increase in the demand for business loans. In agriculture, an expansion of livestock production is under way as farmers respond to the improved profit incentive.
Retailers in the survey expressed more enthusiasm about sales and prospective sales than in recent months. They reported that Christmas sales are proceeding at a rapid pace. A representative of a large department store noted that televisions, radios, digital watches, and many other big-ticket items were selling well. They cautioned, however, that boom conditions were not present. For example, it was noted that sales of some home-related items were still sluggish. Automobile sales were reported good throughout the District, with October and November sales considerably above 1974 levels. These months, however, were only average when compared to earlier years. Reports from automobile dealers indicated a longer lag in obtaining cars, with sales a month or more ahead of deliveries.
Manufacturing activity continues moderately upward in the District, with the advances widespread among most industries—both durable and nondurable. Manufacturers of chemicals, appliances, boxboard, processed foods, and certain home-construction items reported improvement in sales in the past several weeks. On the negative side, one car assembly plant announced a closedown in operations for one week early next year. Also a manufacturer of tailored clothing for rural markets reported that orders for the spring season were below expectations.
A few firms have announced increased capital spending budgets over last year. Also, single-family residential construction has improved somewhat. On the other hand, the amount of commercial construction is generally slow in the District.
With the decline on short-term market rates from the August and September levels, savings inflows have picked up at financial intermediaries. Banks reported increases in all categories of deposits including passbook savings and negotiable CD's; also, savings and loan associations had larger net inflows. Loan demand, especially business loans, continues sluggish at commercial banks. Some smaller banks reported increases in consumer and installment loans, although total District data do not confirm this trend. Rates on bank loans to business in the District have generally declined, along with interest rates nationally. Mortgage rates, however, have risen at some institutions in recent weeks.
One St. Louis saving and. loan association representative noted that nonmortgage lending is becoming more important as an outlet for funds. He reported a doubling in his nonmortgage loans in the past year.
Banks, particularly in rural areas, are reporting lower loan-to-deposit ratios, fewer bad loans, and generally lower profits in recent months. A year ago rural bankers were placing significant amounts of funds in the Federal funds market at relatively high interest rates, thereby boosting profits. But currently there is little opportunity for such investments.
Improvement in livestock product prices relative to feed costs in recent months has provided greater incentive for livestock feeding. Expansion of livestock production is under way; however, major increases in output of most livestock products are not anticipated before mid-1976. In contrast to the favorable prospects for livestock producers, some crop farmers, particularly soybean producers, are experiencing considerable downward pressure on prices. Some shifts in acreage from soybeans to other crops is expected to occur next spring.