St. Louis Fed economist Rubén Hernández-Murillo discusses current economic conditions in the Eighth District, as published in the Beige Book.
Economic activity in the Eighth District has increased modestly since our previous report. Manufacturing activity has continued to increase, and the services sector has improved slightly. Early reports from general retailers indicate that holiday sales increased over a year ago. Home sales have continued to decline across the District, and commercial real estate and construction activity was sluggish. Overall lending activity at a sample of small and mid-sized District banks declined in the three-month period from mid-September to mid-December.
Manufacturing activity has continued to increase since our previous report. Several manufacturers reported plans to open plants and expand operations in the near future, while a smaller number of contacts reported plans to close plants or reduce operations. Firms in the automobile and automobile parts, plastics product, glass, furniture, sanitary paper products, and food manufacturing industries reported plans to expand existing operations and hire new employees. Contacts in the household appliance and paper manufacturing industries reported plans to open new facilities in the District and hire new employees. In contrast, firms in container manufacturing and wood products manufacturing announced plans to close plants and lay off workers.
Activity in the District's services sector has increased since our previous report. Contacts in the storage, business support services, restaurant, and health care industries reported plans to open new facilities in the District and hire new workers. In contrast, contacts in the hazardous waste disposal industry announced plans to decrease operations and lay off workers. General retail contacts noted that holiday sales increased compared with the same period last year. Sales of new automobiles have grown modestly in recent months, while used car sales have been mixed across the District.
Home sales continued to decline throughout the Eighth District. Compared with the same period in 2009, November 2010 year-to-date home sales were down 14 percent in St. Louis, 8 percent in Little Rock, 17 percent in Memphis, and 1 percent in Louisville. Residential construction, however, continued to increase throughout most of the District. November 2010 year-to-date single-family housing permits increased in the majority of the District metro areas compared with the same period in 2009. Permits increased 4 percent in Little Rock and 6 percent in St. Louis and Memphis but decreased 5 percent in Louisville.
Commercial real estate and construction conditions were sluggish throughout most of the District, but contacts anticipate improvements in some areas. A contact in Louisville noted that commercial real estate markets continue to struggle, although contacts expect improvements in the suburban office market in 2011. A contact in northwest Arkansas reported that commercial real estate markets are soft. Contacts in St. Louis noted that commercial construction activity was slow. Contacts in south-central Kentucky noted that commercial construction activity has been very limited, but they anticipate some recovery in the next few months. Contacts in northeast Arkansas reported a few new commercial construction projects in retail centers. Industrial construction activity remains slow throughout most of the District. A contact in St. Louis reported low levels of construction activity. Contacts in south-central Kentucky noted some manufacturing and healthcare-related projects. Contacts in Louisville and St. Louis reported more build-to-suit than speculative industrial construction.
Total loans outstanding at a sample of small and mid-sized District banks decreased 2.5 percent in the three-month period from mid-September to mid-December. Real estate lending, which accounts for 73.3 percent of total loans, decreased 2.4 percent. Commercial and industrial loans, accounting for 16.3 percent of total loans, decreased 0.9 percent. Loans to individuals, accounting for 4.9 percent of loans, decreased 6.1 percent. All other loans, accounting for 5.5 percent of total loans, decreased 5.3 percent. Over this period, total deposits increased 0.7 percent.
Cotton production was strong in the District. The number of bales of cotton ginned (separated from the seed) increased by 75 percent from 2009 by early December and by 6 percent from the average 2007-2009 levels. The District's mid-December year-to-date coal production increased by 2 percent from 2009, while total coal production from mid-November to mid-December was 5 percent higher compared with the same period in 2009.