The economy of the Eighth District expanded modestly in the period since our previous report. Manufacturing activity continued to soften, while in most industries the services sector continued to expand. Reports from retailers and auto dealers of sales in February and March were mostly positive. Home sales continued to be mixed across the District, while commercial real estate market conditions continued to improve. Total loans at a sample of small and mid-sized District banks increased slightly in the three-month period ending in March.
Manufacturing activity has continued to soften since our previous survey. While some contacts reported plans to open plants and expand operations in the near future, a larger number of contacts reported plans to close plants or lay off workers. Firms in the motor vehicle, plastics, and machinery manufacturing industries announced plans to open or expand facilities in the District. A contact in the electronic product industry reported plans to hire additional workers. In contrast, contacts in the electrical equipment, furniture, apparel, food, and auto parts industries announced plans to close plants or lay off workers in the District.
The District's services sector continued to expand in most areas. Firms in the distribution, water transportation, and administrative and support services industries reported plans to build new facilities and hire additional workers. In contrast, a contact in the data processing industry announced plans to lay off workers. Reports from retailers have been mostly positive since our previous report. February and March sales of clothing were cited as particularly strong when compared with year-earlier sales. In contrast, several durable goods and big box retailers reported sales ranging from flat to down. Car dealers reported that sales in February and March increased, on average, compared with year-ago levels. Sales of used cars were particularly strong.
Home sales were mixed throughout the Eighth District. Compared with the same period in 2006, February 2007 year-to-date home sales were up 4 percent in Louisville and 2 percent in Little Rock. Year-to-date home sales were unchanged in St. Louis and declined 6 percent in Memphis. Residential construction was weak throughout most of the District. February 2007 year-to-date single-family housing permits fell in most metro areas compared with the same period in 2006. Permits declined 9 percent in St. Louis, 22 percent in Memphis, and 25 percent in Little Rock. Single-family housing permits, however, were up 15 percent in Louisville.
Commercial real estate markets have remained relatively strong throughout the District. Contacts in west Tennessee reported the commercial real estate market is gaining strength. Contacts in south central Kentucky reported that commercial construction is strong, particularly in the Bowling Green area. Contacts in central Arkansas reported that large commercial contractors have a significant backlog of work for the remainder of 2007. In Louisville, commercial contractors indicated that the volume of work on the market for bids is high and that the strong development in the downtown area continues. Contacts reported that a large automobile plant is set to be constructed near Tupelo, Mississippi, and that a large industrial park is planned in west Memphis.
Total loans outstanding at a sample of small and mid-sized District banks increased 0.2 percent in the three-month period ending in March 2007. Real estate lending, which makes up 74.9 percent of total loans, increased 0.4 percent. Commercial and industrial loans, accounting for 17.0 percent of total loans, increased 0.7 percent. Loans to individuals, accounting for 4.5 percent of total loans, fell 1.3 percent. All other loans, approximately 3.6 percent of total loans, decreased 3.9 percent. Over this period, total deposits at these banks increased 2.5 percent.
Farmers in the Eighth District reported that they expect to plant 20 percent more acres of corn, 76 percent more acres of sorghum, and 5 percent more acres of tobacco this year than in 2006. In contrast, they anticipate planting 11 percent fewer acres of soybeans, 30 percent fewer acres of cotton, and 12 percent fewer acres of rice than last year. This year's total winter wheat acreage increased by 25 percent from last year, and at least 85 percent of each District state's crop was reported to be in fair or better condition. However, subfreezing temperatures in the District over the Easter weekend left winter wheat crops especially vulnerable. At least three-fourths of the pastures in each District state were reported to be in fair or better condition.