Beige Book Report: St Louis
January 14, 1976
The economy continues to expand moderately, according to recent reports from District businessmen. Considerable optimism and confidence about further economic gains in 1976 were expressed, although boom conditions are not expected. Retailers reported a sharp increase in sales during the recent Christmas season from year-ago levels, and most manufacturing firms have experienced improvement in orders. Construction activity has also strengthened in recent months, and prospects for construction in 1976 have improved. Although employment continues to increase and unemployment rates are somewhat below peak levels in 1975, resource use in many industries remains well below capacity levels. Bank loan demand remains sluggish, but demand for mortgage funds at savings and loan associations is reported to be increasing moderately.
Consumer spending has increased significantly in recent weeks. Department store representatives described their sales as very good during the Christmas season. December sales of a wide range of items were generally well above year-earlier levels. Appliance dealers noted improvement in their sales, and automobile sales have continued to improve recently, although a few reports were counter to the general upturn. Despite the generally brighter retail picture during the Christmas season, however, some businessmen are not expecting much strength in consumer durables expenditures this year.
Most manufacturing activity in the District continues upward. Representatives of the steel, chemicals, metal fabrication, wood, shoe, and furniture industries reported improvement in business activity, and most of those interviewed were generally optimistic about prospects for 1976. Aircraft output is also expected to be strong this year on the basis of private and government contracts. In contrast to these reports, a manufacturer of capital equipment reported orders were on the decline, with not much prospect for improvement until the second half of the year. District businessmen indicate that employment has continued to increase in recent weeks. Unemployment rates have moderated from their peaks last year in most parts of the District but remain considerably higher than in previous years. Most firms also reported rising productivity.
Construction industry representatives have recently become more optimistic about prospects for 1976. Single-family home construction has strengthened somewhat, although building activity is in a seasonal decline at the present time. A St. Louis representative of the home-building industry expects a 20 percent increase in construction of single-family units in 1976. On the other hand, construction of multifamily units was virtually at a standstill last year. Government programs aimed at improving this sector are expected to have only a small impact.
Other kinds of construction are also showing expansion. Some projects shelved for the past couple of years, such as shopping centers, hospitals, and industrial plants, are beginning to move forward again according to construction industry representatives. It was noted that with the slack in construction, contractors are generally very competitive and are operating on substantially lower margins than normal.
Financial institutions continue to report rising deposits but only weak to moderate loan demand. Bank loan demand remains sluggish, partially reflecting the reluctance of many businessmen to expand inventories. Savings and loan associations report moderate loan demand, with demand for financing older homes the strongest.