St. Louis Fed economist Rubén Hernández-Murillo discusses current economic conditions in the Eighth District, as published in the Beige Book.
Business activity in the Eighth District has declined slightly since our previous report. While recent reports of planned activity in manufacturing have been positive, reports in services have continued to be negative on net. Residential real estate market conditions have deteriorated slightly, while commercial real estate market conditions have been mixed. Finally, total lending at a sample of small and mid-sized District banks decreased slightly from mid-December to mid-March.
Reports of plans for manufacturing activity have been positive since our previous report. Several manufacturing firms reported plans to add workers, expand operations, or open new facilities in the District, and a smaller number of manufacturers reported plans to reduce employment. Firms in food, steel ferroalloy, roofing material, thermal, furniture, biomedical testing products, alcoholic beverage, medical equipment, industrial inorganic chemicals, and aircraft manufacturing plan to hire new employees and expand operations in the District. In contrast, firms that manufacture carbonated beverages and pharmaceuticals reported plans to close down facilities and lay off workers in the District.
Reports of planned activity in the District's service sector have been negative on net since the previous report. Firms in food, health care, and casino gaming services plan to lay off a large number of employees. In contrast, firms in online shopping, restaurant, telecommunication, marketing, accounting, logistics, insurance, and mortgage services reported plans for new hiring and expansion in District. Reports from retail contacts were generally positive. Contacts reported a number of store openings and planned openings in the St. Louis and Louisville areas.
Business contacts in the Eighth District noted that price and wage growth pressures have been generally modest in recent weeks. Contacts in Louisville noted that challenges in retaining and attracting workers have resulted in some wage growth.
Sales of new and existing homes declined across most of the largest metro areas of the District. Compared with the same period in 2013, January 2014 total home sales were down 12 percent in Louisville, 5 percent in Memphis, and 30 percent in St. Louis. In contrast, total home sales were up 7 percent in Little Rock. Similarly, February 2014 year-to-date single-family housing permits decreased in the largest metro areas of the District compared with the same period in 2013. Permits decreased 26 percent in Louisville, 23 percent in Little Rock, and 10 percent in St. Louis. In contrast, permits increased 14 percent in Memphis.
Commercial and industrial real estate market conditions have been mixed throughout most of the District. A contact in Evansville, Indiana, reported a languishing commercial real estate market. Contacts noted slow growth in the commercial real estate market in northeast Mississippi and no growth in the industrial market in Shelby County, Mississippi. Contacts in St. Louis reported increased demand for industrial space, while office leasing and sales slowed in the first quarter of 2014. On the other hand, commercial and industrial construction activity improved throughout most of the District. A contact in Louisville reported new commercial construction plans in west Louisville. A contact in Memphis reported a new office building construction in the east Memphis business corridor and several new industrial projects in DeSoto and Fayette counties in Mississippi. A contact in Little Rock reported a new industrial construction project. Contacts in St. Louis reported an ongoing construction plan at the Gateway Commerce Center and several industrial construction plans in St. Charles and north St. Louis County.
Total loans outstanding at a sample of small and mid-sized District banks decreased 1.3 percent from mid-December to mid-March. Real estate lending, accounting for 72.9 percent of total loans, decreased 1.3 percent. Commercial and industrial loans, accounting for 15.7 percent of total loans, decreased 0.2 percent. Loans to individuals, accounting for 5 percent of total loans, decreased 0.9 percent. All other loans, accounting for 6.3 percent of total loans, decreased 4.7 percent. During this period, total deposits at these banks increased 0.5 percent.
District farmers are expected to plant 1 million fewer acres of corn in 2014 (a decline of 4 percent) relative to 2013. In contrast, District farmers are expected to plant 570,000 and 511,000 more acres of soybeans and rice this year than in the previous year (an increase of 2 percent and 37.6 percent), respectively. Year-to-date coal production in the District for February 2014 was 5.4 percent lower compared with the same period in 2013. Coal production for February 2014 was 4.6 percent lower than in February 2013.