Beige Book Report: St Louis
September 30, 1981
Area business representatives report that economic activity in the Eighth District has remained sluggish and generally unchanged over the past month. Retailers report a mixed pattern of consumer spending. Sales of apparel and other nondurables are up, while sales of household appliances are generally down. Home construction has fallen from the low levels of the previous month. Representatives of financial institutions report no major changes in either loans or deposits from the previous month. Manufacturing activity appears mixed. Area manufacturers of shoes, textiles, carpet, oil-related products and military equipment report strong sales, while sales of building materials, household appliances and primary metals are weak. The outlook for agricultural output in the Eighth District is good.
Consumer spending
Reports on consumer spending are mixed.
Department store representatives report that sales are up from last
month, but still below what they had anticipated. Consumer
expenditures on major appliances are down. The demand for electronic
video recorders and related products was the only strength in an
otherwise weak market. However, industry representatives indicate
that some of the softness may be seasonal. Auto sales appeared to be
strong in August, but some auto dealers reported a significant
decrease in sales in the past few weeks. Consumer resistance to high
prices and high interest rates was cited as the reason for the
recent drop in sales.
Construction
The number of single-family housing permits issued in
the St. Louis metropolitan area declined in August, and is running
at about 50 percent of the level of a year ago. Industry experts
indicate that this general decline in construction worsened through
September, and are forecasting very low levels of construction
activity for the last five months of 1981. Nonresidential
construction remains fairly strong but has shown some signs of
weakening in recent weeks. The switch of insurance company
portfolios from debt to equity assets was cited as a possible
problem for nonresidential construction. Construction activity
elsewhere in the Eighth District appears to be following a similar
pattern to that in St. Louis.
Financial developments
Total loans in the Eighth District have
showed marked fluctuations over the past month with no basic trend,
although they are down somewhat from their levels of the previous
month. Commercial and industrial loans dropped about 1.5 percent in
August. Agricultural loan demand has increased in recent weeks,
while consumer installment loans remain essentially unchanged.
Real estate loans declined somewhat over the last two weeks. S&L officials have indicated a reluctance to make new mortgage loans. S&Ls lending activity appears to be aimed at shortening the maturity of their loan portfolio. Most S&Ls are offering loans at below market interest rates on homes on which they hold the mortgage; however, several S&L officials indicated that even this loan activity is light.
Deposits of financial institutions have remained fairly steady over the past month. Area commercial banks report modest increases of demand deposits and a general leveling off in the outflow from passbook accounts. S&Ls report a continued, and perhaps accelerating, outflow from passbook savings. Some S&Ls have been able to offset passbook deposit losses with high interest rate deposits which can be converted to "All-Savers Certificates" at the depositor's option. S&L officials continue to be optimistic about the prospects for "All-Saver Certificates."
Manufacturing
Manufacturing activity continues to vary greatly
from industry to industry. The production of building materials,
household appliances and other products particularly sensitive to
high interest rates is at relatively low levels. Automobile output
in the St. Louis metropolitan area remains sluggish, with no
significant change reported in the past month. However, other Eighth
District auto plants have reported increased production. Producers
of shoes, textiles and carpet report increased sales, while
chemicals appear to be steady. The manufacture of oil-related
products and military equipment remains strong. Primary metal
producers continue to report sluggish sales. One area steel
manufacturer has closed shop because customers have failed to honor
their commitments. Some manufacturers who reported declining sales
over the past month indicated that they continue to be in fairly
good shape due to backlogs of orders.
Agriculture
The agricultural outlook for the Eighth District
remains good. Greater than average production is expected for corn,
soybean, milo and rice. Crop maturity and harvesting are normal for
this time of year. The topsoil moisture is adequate in most areas of
the District.