Beige Book Report: Kansas City
May 12, 1976
The buoyant nationwide auto sales picture is mirrored in reports by Tenth District auto dealers, with larger domestic and specialty cars selling very well, while softness is evident in the subcompact area. District retailers contacted were somewhat restrained in their optimism over current and prospective sales, but were, for the most part, quite positive in their assessment of the sales picture. Widespread rainfall across the Tenth District during the past 3 weeks has broken the drought and substantially improved winter wheat crop prospects. With larger grain supplies serving to encourage continued increases in livestock production, food price increases may prove to be the smallest since 1972. Tenth District bankers contacted reported a slightly greater than seasonal increase in total loans last month, but total deposits were reported to be down during April, owing to a large decline in demand deposits.
Reports from a number of Tenth District retailers indicate a continued improvement in retail sales, and prospects, at least through the summer, were rated as good. However, the nature of the sales gains varied from place to place both in terms of composition and strength. Oklahoma City reported overall strong suburban sales, but with weakness in the durables goods sector. Denver, with a healthy resurgence in home construction, reported good retail sales, particularly for large appliances, furniture, carpeting and home improvement materials. In both Omaha and the Kansas City areas, strength in furniture sales was reported, but overall sales results in these areas varied with generally more strength evident in the Kansas City metropolitan area. None of the District respondents reported any real difficulty in getting merchandise, while a number of them indicated that their stocks were somewhat above desired levels.
The auto sales picture in the Tenth District is very much like that nationally. Larger domestic cars and specialty cars are selling very well and inventory levels of these models are well below what dealers consider either normal or desirable. In addition, intermediates and vans are reported to be selling well and some inventory problems in the intermediates are beginning to show or are anticipated. Subcompact sales are weak and inventories of these models are excessively high. In the import sector, sales reports are mixed, and sales gains lag behind those of domestic models. Nonetheless, auto dealers generally express optimism over the sales picture for the remainder of the year.
Widespread rainfall across the District during the past 3 weeks has broken the drought and substantially improved winter wheat crop prospects. The most recent crop report estimated that winter wheat production would be 1.46 billion bushels this year. The estimate for Kansas—the leading wheat state—was increased 16 million bushels from the report a month ago to 302.4 million bushels. Last year, production in Kansas was 350 million bushels.
The prospects for larger grain supplies—reflecting a buildup in carry-over stocks and continued high production levels—should encourage increases in livestock production and help hold food prices to the smallest annual increase since 1972. Total supplies for both feed grains and wheat in 1976-77 will likely surpass year-ago levels. Furthermore, pork output promises to be larger during the second half of 1976, and beef supplies will likely continue high, given the renewed interest in feeding programs. The number of cattle and calves on feed in the 23 major states April 1 was 28 percent above last year's level; however, numbers were still 12 percent below 1974. The District inventory was 30 percent greater than a year ago. Although fed cattle marketings will likely post substantial year-to-year increases for the remainder of 1976, sharp declines in nonfed slaughter should add support to fed cattle prices this spring and summer.
Tenth District bankers contacted during the monthly survey reported a slightly greater than seasonal increase in total loans during April. Real estate loans, loans for securities, and agricultural loans were the major contributors to that improvement. Bankers also reported a moderately improved demand for consumer loans. Auto loans, consumer credit card loans, and home improvement loans generally were said to be increasing. In the Kansas City metropolitan area, bankers contacted reported that most banks were offering automobile loans with maturities up to 42 to 48 months. Business loan demand generally was reported to be weak. Nonetheless, most bankers contacted thought the prime rate would rise modestly during the rest of the year.
Total deposits were reported to be down during April. Demand deposits showed a large decline, while time and savings deposits showed an increase. All bankers contacted in the survey indicated they were offering the new business savings accounts. Reports on the volume of these accounts varied from very good to a leveling off after an initial increase.