Beige Book Report: St Louis
January 11, 1978
Business activity in the Eighth District continued to rise in late 1977, and businessmen generally expect further gains in 1978. Retail sales have registered moderate gains in recent weeks, although automobile sales by some dealers have been less than expected. Retail inventories are generally at a "satisfactory" level, but stocks of some types of cars were reported to be greater than desired. Home construction and sales continue strong for this time of year, and overall manufacturing activity is advancing. In the financial sector loan demand is generally strong. Savings and loan institutions report inflows of savings are smaller than a year ago, and with strong demand for home mortgages, mortgage interest rates are beginning to inch upward.
Consumer spending has continued to advance from year ago levels, and retailers are generally optimistic about sales prospects for 1978. On the basis of limited information, St. Louis department stores made only modest sales gains during the recent Christmas season, but reports from other areas of the District indicate larger gains than in the St. Louis area. Durable goods sales are mixed. Home appliance sales continue up, while automobile sales have leveled off. Automobile sales have declined in the Memphis area, probably reflecting a ruling by the Tennessee Supreme Court which limited interest rates under the state usury law to a 10 percent maximum.
Inventories at the retail level are reported to be "trim." Even at department stores, where sales gains in the Christmas season were only modest, inventories are not considered to be a problem. Inventories of some automobile makes, however, are considered to be above desired levels. Other manufacturing inventories are generally in line with expected sales.
Demand is strong for most types of loans, including real estate, consumer, and agricultural loans. Overall, business loan demand at commercial banks, however, has not increased much in recent weeks. In December net inflows of consumer-type savings deposits at banks and savings and loan associations were well below year ago levels. However, sizable increases have occurred in large negotiable certificates of deposit. Upward pressure on home mortgage interest rates is apparently developing. One large savings and loan association in the St. Louis area recently increased its lending rate on an 80 percent loan to 9 percent from the 8-3/4 percent rate which had prevailed for several months.
Manufacturing activity generally continues to advance. Manufacturing of building materials, appliances, heating equipment, recreational equipment, paints and coatings, paper and boxboard, and hospital supplies are among industries reporting sales gains. A steel industry representative noted that steel orders have unexpectedly accelerated in recent weeks, reflecting prospective anti-dumping measures, and continued overall improvement in steel demand. A major chemical firm, however, notes mixed sales among its product lines, and farm equipment sales are reported to be sluggish, reflecting the relatively low farm incomes of last year.
Home building remains at a high level. Recent home sales in the St. Louis and Memphis areas were reported to be the largest in several years for the winter season. Reports from Memphis also indicate a recovery from the overbuilding which occurred in 1973-74. Due to strong home sales and sizable backlogs of orders, most builders are not laying off workers as normally occurs at this time of year.
Fall wheat plantings are estimated to be down substantially in the District. Wet weather in Missouri last fall hampered planting operations and wheat acreage was estimated to be off 45 percent from last year. Wheat acreage is also reported to be down substantially in Tennessee.