Beige Book Report: St Louis
June 30, 1981
Economic activity in the Eighth District has been generally sluggish in recent weeks according to reports from area businessmen. Retailers report that unit sales of general merchandise and automobiles have shown no improvement in the past two months, although dollar sales are above the depressed levels of a year ago. Appliance, chemical, paper, and building materials firms report a slowing in activity and plan to adjust their production schedules to reduce their inventories. Homebuilding activity remains quite sluggish, although nonresidential building remains fairly strong. Bank lending activity is flat and savings and loan associations continue to curtail lending. In agricultural areas, the planting of crops was delayed by excessive rainfall, but corn and cotton planting is now complete. However, some crops, particularly cotton, have been damaged in some areas by excessive rainfall.
Consumer spending in dollar amount has been rising, but in real terms has been flat or declining in recent weeks according to area retailers. Department store representatives reported that dollar sales are well above last year's level, but noted that year-ago sales at this time were extremely low. Automobile dealers report their sales have changed little during the past two months, but are above year-ago levels.
Manufacturing industries have shown some weakness. Representatives of two major appliance firms reported that recent sales have been sluggish and that appliance inventories are high. One firm plans to curtail production for several days in order to reduce inventories. Manufacturers of chemical and paper products, which reported some strength earlier in the year, noted a recent slowing in sales. Also, with weakening homebuilding activity, producers of wood and wood products, connector plates, and other building products report that sales are very sluggish. A manufacturer of uniforms and other apparel noted that sales were essentially flat in the first half of this year. On the other hand, firms producing energy-efficient equipment, oil and gas equipment, and military hardware continue to experience strong demand.
Some service industries report relatively strong activity. For example, a representative of a firm that owns and operates hospitals nationwide, stated that his business is very strong. Tourism in the district is also expected to make gains this summer, aided by lower gasoline prices.
Residential and nonresidential building activity are reported to be slowing. Homebuilding continues at a particularly slow rate. St. Louis area housing permits rose somewhat in the first half of 1981 compared to a year ago, but activity is now falling off again. Traffic levels at building sites are estimated to be less than one- half that of early this year. Nonresidential building activity in the St. Louis area remains fairly strong based on a sizable number of projects underway. With the fewer new projects, however, there is some indication that such activity is slowing. One large construction and engineering firm reported fewer new projects for industrial plants and highways, and that in the past 60 days three large construction projects had been postponed at a very late stage of development.
Overall, loan activity at district banks is reported to be flat. Business loans have been unchanged in recent weeks while installment loans have increased only slightly. Officials of area savings and loan associations report that few mortgage loans have been made at the 16 to 16-3/4 percent rates now prevailing. So far the new variable rate mortgages have not been offered, although most associations are considering them. S and L officials report some success in building liquidity by reducing mortgage lending and investing in short-term assets.
In the agricultural sector, most crop plantings were later than usual because of excessive rainfall. Nevertheless the intended amounts of corn and cotton have generally been planted. An estimated 10 to 20 percent of the cotton acreage in the upper Mississippi Valley, however, has been damaged by excessive rainfall and will be abandoned. Soybean planting is only 80 to 90 percent complete, but the planting can be continued until about July 4th and still produce a normal yield. The wheat crop has been harvested over most of the District.