Beige Book Report: St Louis
October 23, 1984
Consumer spending continued at a brisk pace during September and early October in the Eighth District, but home sales were down and most other sectors of the economy experienced little change. Expectations by most respondents are that consumer spending will remain strong for the remainder of the year and that manufacturing, transportation and employment will rise moderately, while construction is likely to drift lower.
Consumer Spending
The greatest strength in District economic activity during September
and early October was in retail sales. At six department stores,
sales were 8 percent higher than the comparable period a year ago,
which was then considered a relatively good sales period. Better
quality apparel, sports wear, cosmetics and consumer electronics
moved particularly well, while sales of furniture and carpeting were
below year-ago levels. At each of three discount stores, sales
increases were more than 14 percent above the year-ago pace.
Promotions combined with price markdowns were successful in moving
merchandise.
Auto demand remained strong in most parts of the District during September and early October. In the last week of September, however, sales became somewhat sluggish. Seven dealers reported sales 11 percent higher in September than in the same month a year ago, and early October was nearly as good. Reflecting the strong demand and a continued shortage of popular models, effective new car prices increased at the retail level.
Realtors and developers reported that single-family housing sales in September and early October were about 25 percent below the comparable period of 1983, and new housing starts declined further. In some smaller towns, the real estate market was virtually dormant. The volume of construction activity, both residential and nonresidential, however, remained on a high plateau although some softness is beginning to appear. A building material business continued to operate at capacity, which its owner expected would continue through the end of the year.
Industrial Production and Employment
Output of manufacturing firms generally continued to be strong in
September and early October, but the flow of new orders remained
relatively unchanged. Some customers trimmed orders temporarily in
order to reduce inventories, and auto assembly was interrupted by a
strike. Price changes have been modest, with declines nearly
matching increases. Employment in manufacturing changed little on
balance, but retailers, service firms and government increased their
employment moderately.
Transportation
A railroad reported that business had been drifting lower since a
peak reached in early summer, but activity in September was still 6
percent larger than a year ago. Grain moved well in September
because of the Russian purchases. Railroads are increasing their
orders for new cars. A Memphis-based truck line is still enjoying
excellent business. Barge traffic on the Mississippi remained flat
at a rather depressed level, and there are still a large number of
excess barges.
Finance
Total loans and leases outstanding at large weekly reporting banks
decreased at a 3 percent annual rate in September. This decrease
comes after a 22 percent growth rate during the previous month. A
falling volume of loans to financial institutions was primarily
responsible for the September loan contraction. Commercial and
industrial loans and consumer credit rose at slower rates, while
real estate loans increased at a slightly faster rate than in the
previous month. While total loans were down, total deposits were
growing at an annual rate of 26 percent, reversing the previous
month's decrease at a rate of 19 percent.
Agriculture
Early fall cold weather has effectively stopped any further crop
maturation and shifted attention to the completion of harvest. The
lack of rain during September also has diminished soybean yields 3-4
bushels per acre in the southern portion of the District. Despite
these recent setbacks, harvests for most crops are expected to be
very good, near 1982 levels.
The availability of hogs for slaughter continues to surprise the market and should dampen what were expected to be sharp increases in red meat prices during the fourth quarter. Higher numbers of hogs for slaughter, however, also are responsible for low prices to farmers; recent prices for feeder pigs were only 1 percent above the 1983 average.