Beige Book Report: St Louis
June 23, 1982
Although economic conditions in the St. Louis District generally changed little during May and early June, there were some indications of improvement. Increases in retail sales and total employment provide the most encouraging news. Also, farmers have benefited from relatively high livestock prices and a favorable planting season. Manufacturing orders, however, have not picked up, and the unemployment rate remains essentially unchanged as the labor force has swelled with students seeking summer jobs.
Retail sales rose in the District during May and early June, with discount outlets outperforming regular department stores. St. Louis' largest department store reported May sales 4 percent above a year ago, while a major discount chain experienced a 21 percent jump in sales. Sales of nondurable goods gained the most, reflecting large promotions and price concessions. One shoe store chain reported excellent sales in May—over 25 percent above last May. As a result of the increased sales, retail inventories declined.
Automobile sales, although still below normal, increased again in May. Rebates to customers and factory sales incentives offered to dealers have stimulated sales. A major Ford dealer quickly moved a sizable number of cars slightly damaged by a hail storm by passing on to the purchasers, in cash, the insurance adjustment.
Most service firms report that business has remained steady. Auto and TV repair shops have kept busy. One restaurant chain reports a significant gain in volume. Gasoline sales have improved moderately, and a motel chain noted fewer vacancies. Air travel was especially heavy over the Memorial Day weekend. A firm that provides business promotional activities reported a 27 percent increase in sales during May.
Industrial activity, on the other hand, has changed little in recent months. Defense procurement remains strong, a garment factory reports a backlog of orders despite capacity operations, and sales by food processors are about normal. However, firms producing consumer durables, chemicals, industrial equipment, paper and paper products, and wood products still face depressed orders. Manufacturing inventories are at desired levels as production schedules have been closely adjusted to the flow of incoming orders. Capital spending plans have changed little since April. A Louisville industrial collection agency reports both an increased volume of business and a smaller percentage finally collected.
Employment in the District has increased slightly since April, with gains centering in smaller firms engaged in service activities. Most larger industrial firms have had little change in employment; some have permitted employment to drift lower with attrition. Despite an increase in the number of people working, unemployment continued at a high level as high school and college students sought summer jobs. Even though unemployment is high, a sizable number of job vacancies exist. The St. Louis Post-Dispatch carried about 11 pages of "help wanted" ads in its Sunday editions in early June covering a wide variety of jobs from those requiring much skill, training or education to those with less rigid requirements.
Throughout the District, the demand for commercial and residential construction remains weak. According to the Home Builders Association, residential construction in the St. Louis area was only 15 percent of normal in May. Prices of existing homes are drifting lower, with discounts often reflected in liberal financing terms accepted by the seller to close the contract.
Outstanding loans have risen moderately at both large and small District banks since April. Advances to business firms, particularly food, liquor and tobacco manufacturers and companies providing services, have expanded. Real estate loans also have increased. Delinquencies, although still not large, have risen, and some bankers feel that the financial condition of smaller commercial customers has deteriorated. More attention is being given to managing loan portfolios.
Many District farmers remain in financial difficulty. The average ratio of debts to book value of farm assets has reportedly changed only slightly over the past year. With high interest rates, low grain prices and rising costs of operation, the debts have become more burdensome. On the other hand, livestock producers have benefited from wide profit margins, and weather conditions have been favorable for planting.