Eighth District economic activity expanded modestly since the previous survey. During March, the service sector continued to grow, and manufacturing showed signs of continued improvement. Many contacts in retail trade reported gains relative to last year, although reports from auto dealers indicated decreases in sales relative to this time in 2005. Commercial construction activity continued to increase, while home sales and single-family residential permits in January and February varied across the District. Total lending activity among small and mid-sized banks remained steady.
Manufacturing in the District continued to show signs of moderate expansion. Based on reports received during March, several manufacturers are expanding or opening plants, whereas fewer reported plant closings and workforce reductions. Firms in the plastics, auto parts, and wood products industries announced plans to open new facilities in the District. Contacts in the auto parts, food, transportation equipment, machinery, electronic products, fabricated metal products, and motor vehicles industries reported plans to expand existing facilities and hire additional workers within the next 12 months. Several contacts in the apparel industry, however, reported plans to close plants and lay off workers. In general, most contacts characterized economic activity and the outlook for the future as either "growing" or "stable."
The District's service sector continued to expand in most areas. Contacts in the business support, warehousing, and health services industries reported plans to expand their workforces. Contacts in the freight transportation industry reported strong demand for their services. Most District retailers reported increases in sales of 5 to 10 percent over March 2005 levels. Clothing, building materials, and "big box" retailers reported especially strong growth. Auto sales during March, in contrast, remained below 2005 levels in most areas of the District. Domestic and sport utility vehicles, as well as trucks, experienced the largest decreases in sales. Several auto dealers also reported that sales of luxury models were "soft." Imports and used vehicles fared better, with sales of these described as "relatively brisk" in some areas of the District.
Home sales were mixed throughout the District. February year-to-date sales were up 21 percent in Memphis and over 6 percent in St. Louis compared with the same period in 2005. In Little Rock, February year-to-date home sales were down 6 percent, and in Louisville home sales remained virtually unchanged from the same period last year. Residential construction continued to be slow in much of the District. February year-to-date single-family residential permits declined 44 percent in Louisville, 6 percent in St. Louis, and over 4 percent in Memphis. In contrast, permits were up 16 percent in Little Rock.
Commercial real estate markets in the District continued to grow. Contacts in southern Indiana reported that commercial construction was active, and contacts in northeast Arkansas reported that a number of projects were being planned. Reports indicated strong commercial construction activity in Little Rock, and contacts in St. Louis reported that, in terms of square footage, commercial construction for 2006 would surpass commercial construction projects completed in 2005. Contacts in west Tennessee reported positive expectations for commercial and industrial construction for 2006, and contacts in northeast Mississippi reported that a large industrial project was recently announced for that area.
Total loans outstanding at a sample of small and mid-sized District banks showed essentially no change from early January to late March. Real estate lending, which makes up 72.4 percent of total loans, increased 1.3 percent. Commercial and industrial loans, accounting for 17.2 percent of total loans, decreased 1.2 percent. Loans to individuals, roughly 4.7 percent of total loans, fell 2.3 percent. All other loans, approximately 5.7 percent of total loans, decreased 9.5 percent. Over this period, total deposits at these banks decreased 0.7 percent.
Farmers in the District reported that they expected to plant 8 percent fewer acres of corn, 4 percent fewer acres of sorghum, 14 percent fewer acres of rice, and 15 percent fewer acres of tobacco this year than in 2005. They also anticipated planting 7 percent more acres of soybeans and 4 percent more acres of cotton than last year. Some farmers reported switching from corn to soybeans because the latter were cheaper to grow in terms of nitrogen fertilizer and fuel, which have increased in cost. This year's total winter wheat acreage increased by more than 40 percent from last year, and at least 68 percent of each District state's crop was reported to be in good or excellent condition. At least two-thirds of the pastures in each state were reported to be in fair or good condition.