Beige Book Report: St Louis
December 14, 1977
Business activity in the Eighth Federal Reserve District continued to expand at a moderate rate in recent weeks. Consumer spending has advanced in line with expectations of most retailers, but few inventory excesses have developed. In the financial sector, credit demands remain strong. Time deposits at commercial banks have increased substantially, largely reflecting sales of large CDs. Savings inflows at savings and loan associations continue to increase, but at a more moderate rate than earlier in the year. In the manufacturing sector some gains continue to be made in most industries. Home building remains at a high level for this season of the year. In the farm sector, the income picture has shown some promise for improvement as a result of recent increases in farm commodity prices. Farmers are reported to be holding and storing a larger proportion of their 1977 crops than usual.
Consumer spending has continued above year ago levels according to area retailers. Major department store representatives report that recent sales have been in line with their expectations. Appliance sales at department stores have been especially large in recent weeks. Automobile sales are also reported to be up from year ago levels. Some weakness was noted in women's apparel items, but this was believed to be the result of some unfavorable weather and was viewed as temporary.
Most retailing and manufacturing firms report inventories are at desired levels. However, some product lines—including some chemicals, paints and coatings, and furniture—were reported to be larger than desired. On the other hand, a manufacturer of connector plates used in construction experienced greater than expected sales in recent weeks and some rundown in inventories. Also, inventories of some building materials, principally insulation and storm doors and windows, are well below desired levels.
In the financial sector, commercial banks report that demand remains quite strong for real estate, consumer, and agricultural loans. Demand for commercial and industrial loans has also increased in the past two months. Savings and loan institutions, however, report that home mortgage loan demand has leveled off since last summer.
Total time and savings deposits at commercial banks have increased rapidly in recent months. Time deposits, primarily large certificates of deposits, have increased quite rapidly, more than offsetting a decline in small consumer-type savings deposits. Savings inflows at savings and loan associations have continued to advance, but at a more moderate rate than earlier in the year.
Production of manufactured goods generally continues to advance. Production of capital goods—such as motors, railroad cars, and welding and cutting equipment—were reported to have made further advances. A manufacturer of capital goods reported, however, that although appropriations for capital goods are quite strong, orders had not been as good as expected.
A sizable backlog of orders continues in the home construction industry in parts of the District. In some cases, new home buyers are waiting two months or more beyond original scheduled dates for completion. Unfavorable weather is hampering efforts to get back on schedule.
Reports indicate that farmers are holding a larger proportion of their fall crop off the market than in recent years as a result of the relatively low farm commodity prices. It is estimated that only about 25 percent of the 1977 cotton crop and about 10 percent of the soybean crop has been sold. As a result, farm storage facilities for crops have increased very rapidly this year. Farm income prospects have improved somewhat in recent weeks, reflecting the recent rise in farm commodity prices.
In early December an electrical power emergency developed in the TVA service area and customers were asked to cut back electrical consumption. The situation developed as seven large generating units required repairs (five unexpectedly) at the same time and a substantial rise in electrical power demands occurred due to sharply lower temperatures. Repairs for rest of the units are expected to be completed by the second week of December.