Beige Book Report: St Louis
April 14, 1976
Economic activity in the Eighth District continued to expand in recent weeks according to reports from District businessmen. Consumer spending remains a strong feature of the recovery as retailers report improved sales. Manufacturing activity, with the exception of capital goods, continues to improve, and employment has maintained its upward course since mid-1975. Construction activity is also strengthening. Reports indicate the beginning of an upturn in commercial construction in addition to further expansion in residential construction activity. Bank loan demand has increased somewhat, and mortgage loan demand has decreased significantly. In the agricultural sector, land preparation and planting are currently underway for a large acreage of crops.
Consumer spending remains strong, and retailers are generally optimistic about prospects for the rest of this year. Department store sales have registered gains in recent weeks and are well above year-ago levels. Most lines of department store goods are selling well, including big-ticket items such as appliances and furniture. One appliance dealer in St. Louis noted a definite pickup in sales in the past 60 days. Automobile dealers report brisk car and truck sales in March and a continuation of this rising rate of sales into early April.
Manufacturing activity has gathered momentum as orders and production registered increases in recent weeks. A representative of a local steel manufacturer reports an acceleration in the pace of new orders among all categories of steel products. Manufacturers of shoes, appliances, televisions, and clothing report improvement in their sales. Industries closely tied to residential housing, including a manufacturer of metal connector plates and paints and coatings, also note continued gains. A representative of the aircraft and space industry reported that although commercial demand for aircraft is sluggish, defense contract work is strong. The only negative report was from a manufacturer of boxboard which experienced a drop in demand in recent weeks, after a strong pickup in January and February. However, this drop was thought to be temporary.
Residential construction remains a leading sector in the current business recovery. Residential housing permits have increased recently in all the major District cities. The bulk of this activity has been in the construction of single-family dwellings, although some gains were noted in multi-family units. Apartment construction in some areas is still hampered by relatively high vacancy rates in existing apartments.
Other types of construction, which heretofore had been depressed, are now showing initial signs of recovery. One builder, who last month gave a very pessimistic outlook for nonresidential construction, reported a flourish of new project proposals in recent weeks. These projects included several shopping centers, hospitals, distribution facilities, and restaurants. Notably absent from these reports are industrial projects. Several industrial projects that were only partially completed at the beginning of the last recession remain unfinished. A few industrial projects, including some chemical and food processing plants, however, are reported to be underway.
Employment gains have been a strong feature in the current recovery. Higher employment levels and lower unemployment rates are reported in most areas of the District than in the previous month. In some cases, employers report difficulty in filling certain types of jobs.
Loans have improved somewhat in recent weeks. Larger banks, however, report that the prime rate as officially stated is somewhat above the actual lending rate to some customers, and above the rate on other sources of business funds such as commercial paper. These banks report that some are offering rates at below the official prime rate to larger business customers. Mortgage loan demand has continued to strengthen and thrift institutions continue to experience large increases in savings deposits.
Farming operations are reported to be ahead of normal for this time of year, reflecting better than average weather conditions. Reports indicate that farmers will plant more acres overall than last year. Considerable uncertainty exists about the amount of rice acreage to be planted in view of sharply lower rice prices. In general, farmers are expected to shift some acreage to corn and cotton and away from soybeans. Wheat crop prospects in the District remain excellent.