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Eighth District - St. Louis
Beige Book
April 15, 2015

Wednesday, April 15, 2015


Economic activity in the Eighth District has increased at a modest pace since the previous Beige Book. Recent reports of planned activity have been mixed. On net, reports from the manufacturing sector have been negative and reports from the service sector have been positive. Overall residential real estate market conditions continue to improve in most parts of the District, while conditions in the commercial and industrial real estate markets and construction have been mixed. Total lending at a sample of small and midsized District banks has increased modestly since the first of the year. Finally, plantings are off to a very slow start in southern District states due to wet weather conditions.

Consumer Spending

Retail and restaurant sales grew moderately in the Eighth District during the reporting period. Several retailers throughout the District reported growth in year-over-year sales. Multiple retailers expect sales growth will continue throughout 2015. A major sporting goods retailer is slated to open a megastore in Memphis in the upcoming months. Several restaurant owners cite growing consumer demand as their reason for expanding their business. Openings were announced throughout the District in the retail, grocery, discount store, and apparel sectors. Contacts in Louisville report growing tourism activity related to convention center bookings.

Manufacturing and Other Business Activity

Reports of plans for manufacturing activity have been negative on net since our previous report. Manufacturing companies in furniture, transportation equipment, and plastics and rubber products reported plans to add workers, expand operations, and/or open new facilities in the District. However, large layoffs were reported in the primary metals and chemicals sectors. News from food manufacturers was mixed, with District firms reporting both positive and negative
outlooks for hiring. Reports of hiring plans in the District’s service sector generally have been positive since the previous report. Firms that provide warehousing, storage, health care, social assistance, and business support services reported new hiring and expansion plans in District states. In contrast, several firms in air transportation, truck transportation, and advertising services plan to lay off employees.

Real Estate and Construction

Residential activity continues to improve in most parts of the District. Home sales increased in the Eighth District on a year-over-year basis. Compared with the same period in 2014, February monthly home sales were up 13 percent in Little Rock, 15 percent in St. Louis, and just under 1 percent in Louisville. Monthly home sales declined 6.5 percent in Memphis compared with one year ago. Residential construction in February decreased in the majority of the District’s metro areas on a year-over-year basis. Compared with the same period in 2014, February monthly single-family building permits increased 10 percent in Louisville, 21 percent in Little Rock, and 11 percent in St. Louis. Permits decreased 7 percent in Memphis.

Commercial and industrial real estate activity was mixed throughout most of the District. Contacts in Memphis reported little to no available industrial real estate space in West Memphis, but plenty of available space in Memphis and northern Mississippi. A hotel in downtown St. Louis will be closing in May. Contacts in Little Rock reported stable occupancy in downtown Little Rock, but no significant new office space construction. There are multiple industrial construction projects in the works in Louisville, including plans for two new automotive supplier facilities. Contacts in Memphis reported continued activity in the grocery chains sector; ground just broke for a major store in DeSoto County, Mississippi. A new office building will break ground in Chesterfield, Missouri, later this year. A major grocery store chain is moving forward with plans to build a warehouse in Springdale, Arkansas.

Banking and Finance

Total loans outstanding at a sample of small and midsized District banks increased 1.2 percent from the end of December to mid-March. Real estate lending, which now accounts for 71.5 percent of total loans, decreased 0.2 percent over the period. Commercial and industrial loans, now accounting for 16.0 percent of total loans, increased 1.5 percent over the period. Loans to individuals, now accounting for 5.0 percent of total loans, decreased 0.5 percent over the period. All other loans, which now account for 7.4 percent of total loans, increased 1.6 percent over the period. Total deposits at these banks increased 2.4 percent over the period.

Agriculture and Natural Resources

District farmers will plant fewer acres of corn and cotton this year than in 2014. In lieu of cotton and corn, District farmers will plant more acres of soybeans and notably more sorghum. Arkansas and Mississippi farmers are significantly behind in their corn plantings as of late March due to very wet conditions. Persistent wet conditions may motivate farmers to switch additional plantings of corn to soybeans due to a later sowing window for soybeans. A rancher in western Arkansas also noted that the ground is wetter than it has been in over 25 years. District coal production for February was about 7.5 percent lower than in February 2014. The overall decline was driven by decreased production in Illinois, Indiana, and western Kentucky.

Employment, Wages, and Prices

Anecdotal information suggests that employment growth is modest and wage pressures remain moderate in the District. Most new jobs have been announced in the retail and service sectors, while layoffs have been announced in the  manufacturing sector. A manufacturing contact in Little Rock suggested that it has become increasingly difficult to hire and keep quality staff. Construction industry contacts in Louisville and St. Louis noted difficulties finding qualified workers. Transportation industry contacts continue to note that wages for employees with critical skills are increasing faster than wages for other positions.

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