Beige Book Report: St Louis
December 16, 1981
The sluggishness in the Eighth District economy has persisted through early December. Retail sales are generally lower than expected, resulting in excess inventory. Most manufacturers report declining orders for spring deliveries, and some have made additional layoffs of personnel in the past month. Construction activity remains mixed. Both commercial and residential construction have leveled off, commercial at a relatively high, and residential at a very low level. Financial institutions report a moderate increase in time and savings deposits, while commercial banks report a moderate increase in loans. In the agricultural sector, favorable weather permitted the harvesting of record crops. In addition, the outlook is for a relatively large livestock production.
Consumer spending, based on department store sales, generally weakened in November and early December. One major St. Louis department store reported excessive inventories given the current sales volume. Elsewhere in the Eighth District, reports of consumer spending are mixed--some retailers reporting sales declines and some reporting gains of 15 percent or more from year-ago levels. Most of the firms surveyed reported slim margins and declining profits. Automobile sales are about in line with sales of other consumer goods. Of the five dealers reporting, three reported weaker sales, one reported no change and one, stronger than year-ago levels.
Manufacturing activity in the District is generally weak. One large paint manufacturer reported that declining sales had resulted in the first layoffs in his firm's history. One major shoe manufacturer reported that orders and output were from 0 to 10 percent below year-ago levels. Similar reports were received from manufacturers of electric motors and equipment, home appliances, and paper box construction. One uniform manufacturer reported that business was down 2 to 3 percent from a month ago. Optimistic reports were received only from the manufacturers of oil drilling and energy- related equipment.
Inventories have now become somewhat burdensome in a number of cases. A major St. Louis retail outlet reported that inventories were 5 to 10 percent too high at the retail level, that September inventories were the third highest in the decade and that price cutting was in prospect to reduce them.
Construction remains generally unchanged from early autumn levels. Commercial construction is at a relatively high plateau, while homebuilding is at a standstill. A St. Louis area reporter for commercial contractors estimated that 1982 would be as good a year as 1981, which was considered very good. He reported a number of major projects soon to be started. More pessimism is heard, however, than a year ago and a number of former general contractors have now become subcontractors.
A moderate increase in savings was reported by most financial institutions. A major savings and loan company in St. Louis reported that November savings were up 1.3 percent from a month earlier. Also, time and savings deposits were up moderately at Eighth District commercial banks. Loan demand, however, remains weak. A major savings and loan association reported little or no loan activity. Loans at large Eighth District commercial banks have increased moderately since the end of October, but, some banks indicate that this increase is largely seasonal. Some increase in collection problems is surfacing. A Louisville industrial collection firm reported that the percentage of collections per million dollars dropped significantly in October as compared to a year ago.
Record-breaking crops have been harvested over most of the District, but net returns to farmers are about the same as a year ago. Prices received have generally been lower than expected; hence, the good yields and high production have been offset by lower prices. Consumers, however, are being favored by relatively large food supplies at relatively moderate price increases.