Beige Book Report: St Louis
April 12, 1977
Economic activity in the Eighth District continues on an upward course. Reports on department store sales indicate only modest improvement in recent weeks, but a definite acceleration has occurred in manufacturing activity over a broad range of industries. While some signs of a pickup in capital investment were detected, individual firms indicate only modest investment increases for this year. Residential investment, however, is on the uptrend over most of the District with substantial gains in both single- and multi-family dwellings expected this year. The financial sector is generally in a liquid position. Banks report only modest increases in business loans, but savings and loan associations report strong demand for mortgages, spurred by the increasing demand for housing. In the agricultural sector recent rainfall has improved soil moisture. Soil preparation and crop plantings are now proceeding at a normal pace.
Consumer spending continues to increase, although no surge in such spending was evident in reports from District retailers. One major retailer reported that March sales were well above last year, with heavy goods, such as appliances and furniture, beginning to move well. Another major St. Louis retailer, however, reported only small gains in March and sluggish sales in early April compared with a year ago. Overall, retailers are optimistic about prospects for this year, with sales gains of 8 to 10 percent generally expected.
Representatives of several manufacturing firms were quite optimistic about business trends in recent weeks. A representative of a major chemical firm stated that sales of a number of products, including fibers, plastics, industrial chemicals, and agricultural chemicals, had shown significant improvement. Another chemical industry representative making polymer specialties also reported a "good" recovery in March, after a slow January and February. Representatives of firms manufacturing paints and coatings noted that first quarter profits had been adversely affected by bad weather earlier this year, but a pickup in sales in the latter part of the quarter had improved profits over earlier expectations. Reports from various manufacturers of consumer items, including furniture, home fashions, apparel, recreational equipment, and appliances, reported rising incoming orders. Representatives of large food processing firms were quite optimistic about trends in the food business and expected good sales gains this year.
A few reports indicated that capital investment may be starting to pick up. For example, a major manufacturer of heavy capital equipment has experienced some increase in capital equipment orders recently. A steel fabricating firm and an industrial casting firm reported increased requests for bids. A representative of a welding and cutting equipment firm noted continued improvement in sales in recent weeks. A manufacturer of items used in construction had strong sales gains in March. Yet, discussions with a number of small- to medium-sized businesses indicated a reluctance to go ahead with capital spending plans in view of a number of uncertainties, including environmental regulations and energy policies. Plans for capital expenditures were mostly of a routine nature, designed to replace or upgrade existing facilities or to comply with environmental regulations.
Housing continues to be a bright segment of the economy. Home sales have been increasing in recent weeks after the setback early in the year. Backlogs of orders for new homes are beginning to build up in some cases. An observer of the St. Louis home market expects housing starts to increase 15 to 25 percent this year for single-family dwellings. Apartment construction in St. Louis is also expected to make gains. Reports from the Memphis and Louisville areas also indicate some improvement in the housing markets. District banks have experienced some increases in loans in recent weeks, although much of the increase has been in real estate loans. Business loans have remained relatively stable, after increasing somewhat in the early months of the year. Savings and loan associations in the St. Louis area experienced some slowing in the growth of deposits in the past four to six weeks, especially at those institutions which lowered their rates on deposits. Loan demand at thrift institutions is described as "good," reflecting the general uptrend in housing activity.
Agricultural prospects in the District have been considerably enhanced by sizable amounts of rainfall in the past several weeks. While these rains have not been sufficient to completely replenish subsoil moisture in parts of the District, they will allow field preparation and planting to proceed at a normal pace.