STRICTLY BUSINESS: GOOD NEWS AND BAD NEWS IN ECONOMY OF REGION IN 1995

Plants are closing, employee layoffs continue and sales declines are still occurring, but the economy over a seven-state area, including Southeast Missouri, continues to grow.

Much of the bad news has been offset by good news -- plant expansions, new hiring and sales gains, says Joe Elstner, who prepares the "Beige Book" for the Eighth Federal Reserve District.

The Beige Book summary is a report on economic developments throughout portions of seven states, including Missouri.

The St. Louis Federal Reserve Bank has branches in Little Rock, Ark.; Louisville, Ky.; and Memphis, Tenn. The district includes all of Arkansas, Eastern Missouri, Southern Illinois and Indiana, Western Kentucky and Tennessee and northern Mississippi.

The Beige Book, said Elstner, can best be described as a "collection of views compiled from various business and community leaders throughout the district."

It is not an in-depth report, emphasized Elstner, "but it gives a good snapshot of the economy."

Leaders, said Elstner, provide information confidentially, knowing that it helps check the pulse of the regional economy, helping the Federal Reserve Bank of St. Louis and the Federal Reserve System to determine monetary policy.

Beige Book information -- provided every six weeks -- can be accessed through the Federal Reserve Economic Data (FRED) electronic bulletin board. FRED can be reached with a personal computer and modem at (314)-621-1824.

The latest summary, released this week, indicates that the district economy continues to grow.

In a survey of more than 250 businesses throughout the district, most foresee little change in economic activity over the final half of 1995.

Although new housing permits around the district are below last year's record levels, except in Memphis, the pace has picked up.

Nonresidential construction appears to be rising in Little Rock and Louisville. Permits are down 10 percent in the St. Louis area.

Total loans have increased at 12 of the larger district banks. Total loans rose 2.6 percent between mid-June and mid-August after rising 1.9 percent the previous two months.

Total loan growth up

"Real estate loan growth is responsible for much of the growth in total lending, up 7.6 percent over the past four months. Consumer loan growth, said Elstner, is "soft," rising only 0.8 percent from mid-June through mid-August, after dropping more than 3 percent during April, May and June.

The hot, dry weather has hurt the yield potential of some crops and has caused significant losses in the poultry industry. Although widespread showers and good irrigation systems kept crops in mostly good condition, the hot weather has caused heavy losses in poultry in Arkansas and Mississippi. Also down is production of Southern pine lumber.

Economy activity is little changed from recent reports, noted Elstner. A telecommunications company reports gains in employment levels because of new contracts it has negotiated. And, after reports of decline in a wood furniture industry, the company is reporting an upturn.

Contracts of companies fabricating metal and manufacturing commercial hardware report production at "full throttle," said Elstner. And, sales at companies in some industries -- prefabricated metal buildings, electric motors, brick manufacturers and scrap metal -- are up 7 to 15 percent so far this year.

One report, from Northwest Mississippi, says that labor markets are very tight in that area, leading some companies to lure employees from other companies.

Reports from Memphis and St. Louis and Cape Girardeau relate instances of fast food restaurants posting "help wanted" signs.

Not all is good; however, there are some areas of decline.

Downsizing and plant closings have been reported among durable goods producers. A few auto parts manufacturers and producers of industrial boilers and air conditioners point to declining sales as the reason for employment losses.

About half of the 250 businesses surveyed expect to keep their selling prices at the same level over the next three months. Some 20 percent, however, are looking to increase selling prices. More than 75 percent of the companies see no changes in their employment levels over the next three months.

Industrial production up

Last week's national Federal Reserve report showed that a key indicator of inflationary pressures also rose strongly in August. Industrial production surged 1.1 percent. Industries were operating at 84.3 percent of capacity last month.

The operating rate, the highest since March, is watched closely by the Fed and private economists for signs that factories are approaching capacity that could lead to inflationary worker shortages.

Much of the August spurt in production was on car assembly lines and due to an increase of nearly 5 percent in utility output as air conditioners were turned up at homes and businesses.

Federal Reserve policy-makers will meet Sept. 26 to review the economy and decide their next move. The Federal Reserve cut a key rate in July for the first time in nearly three years but has remained on the sidelines since.

Retail sales were also up, 0.6 percent, in August, according to the U.S. Commerce Department. That marks the third advance in the last four months.

Retail sales totaled $197.3 billion in August, up from the $196 billion in July.

Last month's increase was slightly less than many analysts expected. The economy is expected to regain some momentum after a period of sluggishness marked by slower consumer spending and inventory trimming by businesses.

A surge in car buying fueled the August increase. Car dealers reported a 2.4 percent jump in August sales after they fell 1.5 percent the previous month.

Excluding autos, retail sales were unchanged in August compared to a 0.3 percent gain in July.

Sales of durable goods -- including appliances, autos and other goods -- up 1.7 percent last month after falling 0.8 percent in July.

Sales were down for food, fuel, apparel and grocery sales.

Open house for new facility

Mid-South Steel Products will hold an open house at its new office and manufacturing facility, 2071 Corporate Circle Drive, just off of Southern Expressway (Highway 74), this month.

The daylong, celebration will be held Thursday from 8 a.m. to 5 p.m.

Mid-South moved into its $500,000 facility earlier this year.

The company, previously in the Red Star District, had been under water five times in the past 20 years, noted Albert L. "Sonny" Underwood Jr., president of the firm.

"If it weren't for the river, we probably wouldn't have moved," Underwood said. "It was time to do something."

The company was literally water-logged in 1993 when floodwater, standing 6 feet high, forced a shutdown during July and August.

Mid-South Steel is in its 40th year of business. The company opened in 1954 in a 40-by-50-foot building, which was soon expanded to 80 feet by 160 feet. In 1968, the plant moved into new quarters totaling about 32,000 square feet. The work force has increased to 35 and the company has experienced a 35 percent increase in manufacturing equipment for gas stations and farms.

Business has grown so Mid-South produces more than gas tanks.

Gas tanks are only a small portion of Mid-South's business now. The company also sells the pumps, and also manufactures the canopies, lights and everything that goes with them.

The company utilizes two new buildings at Corporate Circle. The smaller building is 19,200 square feet -- 80 feet by 240 feet. The larger building is 21,000 square feet -- 60 feet by 350 feet.