Beige Book Report: St Louis
November 16, 1982
Although economic activity in the Eighth District remained depressed in October, increased consumer outlays point to a developing recovery. Respondents noted that inventories are near desired levels and that prices have been more stable in recent months, providing a better climate for an economic rebound. Production and employment, however, changed little in October, and many respondents in the manufacturing sector expect no improvement before spring. Respondents believe that long term interest rates will decline only slightly if at all over the next six months or year.
Retail sales in the District, adjusted for both seasonal differences and price changes, were moderately higher in October than in the summer and early fall. Sales strength at department stores was centered in apparel and other soft goods. Furniture dealers sold more higher quality merchandise while cheaper lines continued to move slowly. Merchants are becoming moderately optimistic about sales during the Christmas season, in part because of the increased after-tax incomes of consumers, the greater wealth brought about by higher stock and bond prices, and the lower level of interest rates. Retailers, nevertheless, have been holding a tight rein on stocks of merchandise.
Two of the most depressed sectors of the District's economy, autos and homes, also improved slightly during October. Automobile dealers reported sales increases for both new and used cars; one Ford dealer claimed sales were 10 percent above October 1981. Price concessions, heavy promotion and lower interest rates contributed to the sales gains.
Sales of new homes in the St. Louis area were about 15 percent greater in October than in the corresponding month last year, according to the St. Louis Homebuilders Association. Sales, nevertheless, remained nearly 70 percent below what the Association terms normal for the month. Proceeds from county revenue and state housing development bonds, which lower the effective interest rates for qualified home buyers, contributed to greater sales. Builders' inventories of unsold homes declined slightly during the month. Commercial construction in the District also improved in October.
Industrial activity in the Eighth District was unchanged on balance from September to October. Firms supplying goods for national defense continued to expand. Food, livestock feed and apparel production remained roughly unchanged. Orders and output at most other manufacturing concerns, however, were slightly lower. Inventories remained near desired levels at most firms as production was adjusted closely to the flow of incoming orders. In response to the prolonged recession and a rather bleak outlook, a few industrial firms trimmed their plans for capital expansion in 1983. On the other hand, a company dealing in motivational programs for businesses reported an increase in new accounts recently, usually an indicator that business activity will improve.
Total employment in the District was changed little in October. Some industrial firms continued to reduce their work force, largely through attrition. These declines were offset, however, by a continued expansion of jobs in the service sector and a recall of workers at an auto plant.
Agricultural output in the District was exceptionally large in 1982. In some areas, there are shortages of grain storage capacity. Also, selling prices for crops have been depressed. As a result, many farmers are in financial difficulty, especially those that began the year with sizable indebtedness. Some banks serving rural areas have been forced to extend the maturities on advances to farmers unable to repay at this time, and the quality of outstanding loans at these banks has deteriorated. Farm equipment dealers continue to report few sales, and the price of farm land drifted lower. High selling prices and low feed costs, however, have generated large profits for hog raisers. Cattle, dairy and poultry producers have also benefited from relatively favorable feeding margins.