November 9, 1977
Economic activity in the Eighth Federal Reserve District continues upward, although the rate of increase has slowed from the rapid advances early this year. Some gains in consumer spending have occurred since last summer. Manufacturing activity continues at a high rate, but with only modest gains in recent weeks. Businessmen are generally satisfied with the current level of inventories. In some cases inventories have been increased to reflect anticipated increases in sales, but reports indicate that cautious inventory policies are being followed. In the financial sector, demand has been brisk for all types of loans. Crop yields in the District are generally excellent and, on the whole, harvesting has proceeded ahead of schedule.
Consumer spending continues to increase relative to year ago levels. Gains in sales since the summer months have been primarily in softgood items, but big-ticket items, such as furniture, appliances, home improvement items, and automobiles, have continued to sell at the relatively high midsummner rates. Strong Christmas holiday sales are anticipated by department store representatives, and gains over a year ago are expected to be at least as large as those posted in recent months.
Inventories at both the retail and manufacturing levels are reported to be at a desirable level, given current sales expectations. Retailers note inventories are sufficient to accommodate some increases in sales, but they believe overstocking for the Christmas season has been avoided. A manufacturing representative of a capital goods firm noted that inventories have been built up for certain items in anticipation of future increases in sales. While these inventories are now considered to be at a healthy level, it was noted that a decline in sales from expected levels could substantially alter this appraisal. One clothing manufacturer reported a greater than preferred level of finished goods at the manufacturing level, but this situation was improving rather than worsening. In home construction, inventories of unsold homes are quite low and some backlogs of buyers still exist.
A recent slowing in savings inflows has been detected by financial institutions. Savings and loan association representatives report that recent slower gains in savings deposits may be the result of rising market rates relative to rates offered by financial intermediaries. Commercial banks have experienced increases in total savings deposits, but most of the increases were in higher-yielding time deposits and large certificates of deposits.
Demand remains strong for most types of loans. Home mortgage loan demand is still quite strong for this time of year. Earlier this year mortgage lenders had difficulties in keeping up with the incoming applications for loans, but the rush has subsided. Instead, lenders are now actively seeking loans. Business loans at larger commercial banks have picked up after several months of sluggishness. A representative of a large commercial bank noted that demand for loans by large corporations was greater than it had been for some time. Also, further gains in consumer, real estate, and agricultural loans were registered in recent weeks.
Manufacturing activity continues at a high level. Strength emanating from the housing sector is noted by several manufacturers. A major appliance manufacturer, for example, noted that contract sales to the housing industry have continued brisk, and that appliance sales at the retail level have held up better than anticipated. Suppliers of building materials, such as heating equipment and connector plates, report sales on a seasonally adjusted basis are still quite vigorous. A representative of a capital goods firm pointed to substantial increases in orders from a year ago, and further gains are anticipated next year. On the other hand, an apparel manufacturer, serving mostly rural areas, reports little change in sales in recent months as a result of lower farm incomes. Also, despite generally good sales of chemicals, sales of some fibers and plastics have been less than expected, partly reflecting sluggish export markets.
Crop yields are reported to be excellent and harvesting of crops has continued at a generally satisfactory pace in the District. Cotton picking is well ahead of normal and rice harvesting is virtually complete. On the other hand, soybean harvesting has been held up by rainy weather and in some areas of the District fall planting of wheat has been halted. Harvesting of some crops is not likely to be resumed until freezes permit farm equipment to be moved into the fields.