STRICTLY BUSINESS: EXECUTIVES CAUTIOUS IN FORECASTING

Missouri business leaders are still anticipating moderate-to-substantial retail sales growth, manufacturers and other business contacts remain optimistic for the new year, with orders and inventories at desired levels, and construction activity, especially commercial, is expected to remain strong.

These are findings from two different fronts -- a survey of Missouri executives by the Bank of America, and the latest edition of the "Beige Book" survey conducted every six weeks by the Federal Reserve's 8th District, highlighting economic development in parts of seven states in the Midwest.

More than two-thirds of the Missouri executives, 71 percent, interviewed by Bank of America, say they are somewhat optimistic regarding the short-term health of the nation's economy. That figure is up from 50 percent a year ago.

Only 4 percent of the executives, however, say they are "very optimistic," and 21 percent say they are neutral.

"It seems as if business leaders in Missouri are wondering how much longer this economy can keep going," said Marcus W. Acheson IV, executive vice president and head of the Bank of America's Midwest Commercial Banking division, which talked with 626 business executives who represented manufacturing, wholesale, service and retail industries. No one, said Acheson, has any hard evidence that this growth spurt will stop anytime soon. "But the executives we surveyed are evidencing only cautious, not "wildly bullish," optimism.

Bank of America's Midwest Division serves companies throughout Missouri, Illinois, Indiana, Iowa, Michigan, Minnesota, Ohio and Wisconsin.

Thirty-two percent of the executives expect substantial increases in sales, and another 51 percent expect moderate increases.

Opinion was evenly divided regarding short-term interest rates -- 49 percent say they anticipate an increase in the short-term rates during the first half of the year; 47 percent predict no change.

Other Missouri findings:

Seventy-two percent of the executives expect an increase in labor cost, ranging from 2 to 5 percent.

Twenty-three percent of Missouri executives plan to add more workers to the payrolls the first half of 1998. Another 71 percent expect to employ about the same amount of workers. Only 6 percent say they will employ fewer workers.

Fifty-nine percent say they are not planning any significant capital investments the first half of the year.

The survey also found that Missouri is among the leading Midwestern states in readiness to address year-2000 computer problems. Only 3 percent of executives say they have not conducted a system assessment. Responses in other states range from 14 percent who have not conducted an assessment in Illinois to 2 percent who have yet to do so in Ohio. Twelve percent of Missouri execs say they do not have sufficient staff resources to deal with year-2000 problems.

The 'Beige Report'

The Beige Book, so-named because of its color, is produced eight times a year, highlighting economic developments in eastern Missouri, western Kentucky, western Tennessee, southern Illinois, southern Indiana, northern Mississippi and all of Arkansas.

The 8th District Federal Reserve is headquartered at St. Louis and has branches in Louisville, Ky., Little Rock, Ark., and Memphis, Tenn.

The Beige Book, scanned by bankers throughout the district, is best described as a collection of anecdotal information, compiled primarily from various business and community leaders throughout the district, said spokesman Charles Henderson.

Although the report is not an in-depth one, the Federal Reserve uses it as one of many tools to help determine monetary policy.

Despite reports of modest retail sales growth, 2 to 3 percent, during the holiday season, the 8th District's economy started the new year showing signs of continued moderate growth, with retailers expecting moderate-to-strong sales during the first quarter of 1998 because of heightened consumer optimism about the economy.

Manufacturers and other business contacts remain optimistic; nonresidential construction remained strong in southern parts of the district, and loans at large district banks rose during the final two months of 1997.

The only "down" area appears in the agriculture sector, where representatives anticipate slowing farm exports because of the crisis in Asia.

Following a seasonal pattern, monthly residential permits in November were down in all district metropolitan areas, except Texarkana, Ark. Year-to-date permit levels, however, are up in four of the district's metropolitan areas, with construction of higher-priced homes (more than $250,000) strong in many areas.

Contacts throughout the district say manufacturing orders and inventories are at good levels, and one meat-packing official reports a "booming" market because of low pork prices and a high demand for sausage products.

One concern is a shortage of workers in some areas. One company is subsidizing bus service from high-unemployment areas to its plant.

Even though auto sales have been somewhat sluggish, some suppliers in the auto industry is expanding -- a new stamping plant is scheduled for opening in southern Indiana.

The district aerospace industry got a boost from an expansion of a current Navy contract for jets.

Contacts in the agriculture sector -- particularly from the rice and cotton growing areas -- Northern Mississippi and Arkansas and Southeast Missouri -- report that prices of used machinery has picked up, but that price increase for new farm machinery is below those noticed at the same time a year ago.

Some increases have been noted in farmland prices -- primarily for "good" farmland.

B. Ray Owen is business editor for the Southeast Missourian.