Beige Book Report: St Louis
August 10, 1983
Economic expansion continued during June and July in the Eighth District, and most respondents anticipate that their activity will rise further during the fall and winter. Although July is typically a slow month for production, with some plants closed for taking inventories, model changeovers and vacations, the interruption this year was less than usual. The greatest strength, both in retailing and manufacturing, was in consumer durable goods, while the weakest area continued to be in business capital goods. Total employment has risen slowly. Hot and dry weather has prevailed over most of the District, and it is critical for crops that a soaking rain come soon.
Outlook
The average forecast made in late July by 11 members of the St.
Louis Chapter of the National Association of Business Economists was
that real GNP would rise at a 5.9 percent annual rate in the last
half of 1983 and that the price deflator would increase at a 4.7
percent pace. The chief longer-run concern was the threat of
accelerating inflation resulting from continued growth of government
spending and rapid monetary expansion.
Sales
Sales at seven District retail stores were 9 percent higher in June
and July than in the corresponding months last year. Promotional
activities played a role in generating sales, while the July tax cut
provided additional buying power. Most lines sold well, especially
appliances and other consumer durables.
District automobile sales continued to be strong in June and July. One large St. Louis dealer reported sales 40 percent above year ago levels; he attributed the rise to incentives offered the consumer, particularly the low subsidized interest rates. Used car and truck sales were also sizable. One major dealer sold more used cars in June and July than any two months on record.
Home sales in the Memphis and St. Louis areas, which began weakening in May, remained rather sluggish in June and July. The hot weather and increased mortgage rates and home prices contributed to the slowdown. Housing starts in the District; however, remained large. In greater Louisville, a number of new homes are being built in older subdivisions that had been dormant, and in the St. Louis area housing starts were triple the level of June and July 1982.
Manufacturing
Most industrial firms in the District reported further increases in
orders and shipments since May. Two of the companies making business
equipment, which had reported no improvement earlier, noted a small
gain in orders. On the other hand, a major glass container firm
announced it would permanently close a plant in early October,
resulting in the loss of over 300 jobs; at the peak, this plant
employed 2,400 people.
Inventories at most District firms are near desired levels, but a recent survey found that about a third of the manufacturing companies planned to increase inventories this fall. A few firms, which raised the prices of their products moderately, could not make the higher prices stick.
Employment
Total employment rose modestly in the District in June and July as
firms in the automobile and aircraft assembly, airline,
construction, retail trade, printing, paper products and service
industries added workers. In addition, one automobile company
announced that it will recall 3,100 workers in September, and
another will recall 1,500 in the near future. A few business firms
and local governments, however, were still reducing their work
forces, primarily through attrition.
Finance
A survey of eight savings and loan associations in the Louisville
and Memphis regions found that, in June, the dollar volume of
mortgage loans made and acquired was about four times greater than
in June of last year. Moreover, during that month these associations
were able to reduce Federal Home Loan Bank and other borrowings. At
large District banks, consumer installment loans rose substantially,
and commercial and industrial loans increased moderately in June and
July. On the other hand, outstanding real estate credit at these
banks drifted lower.
Agriculture
The hot dry weather over much of the District since mid-June has
adversely affected the corn, soybean and tobacco crops. Some areas
went seven weeks without a substantial rain. Although there has been
irreversible damage, harvests are still expected to be sizable if
rain falls in the next week or so. Vegetable, peach and apple crops
also have been severely affected, in addition, dairy farmers
probably will be facing higher operating casts because of the
drought damage to the alfalfa crop.