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Eighth District - St. Louis
Beige Book
Jan. 14, 2015

Wednesday, January 14, 2015


The pace of economic growth in the Eighth District was slightly faster than the pace reported in the previous Beige Book. Early holiday sales reports from retail contacts have indicated an increase relative to a year ago. Reports from auto dealers have generally been positive. Recent reports of planned activity in manufacturing and services have also been positive, on net, since the previous survey. Overall, residential real estate markets have remained weak, while commercial and industrial market conditions have continued to be mixed. Lending at a sample of small and midsized banks increased from mid-September to mid-December.

Consumer Spending

Anecdotal reports from retail contacts indicated that consumer demand has grown since the previous reporting period. Retail contacts attributed growth to low gas prices, improving regional labor markets, and low interest rates. Additionally, initial reports indicated that holiday sales throughout the District have been higher than last year’s holiday sales. Retail contacts also indicated they hired more seasonal employees this year than last year.

Auto dealers reported that end-of-year sales remained above goals—although one contact reported that sales were more sluggish in recent months than in the third quarter. Contacts noted that inventories of luxury cars are increasing faster than sales for some dealers.

Manufacturing and Other Business Activity

Plans for manufacturing activity remained positive in the most recent reporting period. Firms in chemicals, aviation, packaging, and light machinery plan to hire new employees and expand operations in the Eighth District. In contrast, firms that manufacture furniture and paper reported plans to lay off workers or close facilities. Hiring plans among food manufacturers were mixed.

Plans for activity in the District’s service sector have also remained positive. Firms in logistics and information technology services reported new hiring and expansion plans in the District. In contrast, firms in courier, building maintenance, and business support services plan to lay off employees. Reports from firms in healthcare services were mixed.

Real Estate and Construction

Home sales decreased in the Eighth District on a year-over-year basis. Compared with the same month in 2013, November 2014 monthly home sales were down 11 percent in Louisville, 1 percent in Little Rock, 9 percent in Memphis, and 2 percent in St. Louis. Residential construction declined in the majority of the District metro areas. November 2014 year-to-date single-family housing permits decreased in the majority of the District metro areas compared with the same period in 2013. Permits decreased 9 percent in Louisville, 16 percent in Little Rock, and 5 percent in St. Louis. Permits increased 2 percent in Memphis.

Commercial and industrial real estate market conditions in the District have continued to be mixed. A contact in Louisville reported modest improvement in the office space market. A contact in Little Rock expressed concern regarding occupancy rates in the downtown office market. In contrast, a contact in Memphis noted strong leasing activity in the office market and a contact in St. Louis noted that tightening industrial market conditions are placing upward pressure on asking rents. Commercial and industrial construction has also been mixed throughout the District. A contact in Louisville reported that a large employer has finalized plans for a distribution center near Jeffersontown, Kentucky. A contact in Little Rock reported that work on Arkansas’s first outlet mall in southwest Little Rock will begin in January 2015. Contacts in Memphis noted that its access to rail, water, and air transportation continues to encourage large employers to build distribution centers and retail stores in the area. A contact in St. Louis reported that a major employer recently broke ground on a new production facility.

Banking and Finance

Total loans outstanding at a sample of small and midsized District banks increased 1.2 percent from mid-September to mid-December. Real estate loans, which account for 71.1 percent of total loans, increased 0.6 percent over this period. Commercial and industrial loans, which account for 16.3 percent of total loans, increased 3.0 percent over the period. Loans to individuals, which account for 5.4 percent of total loans, increased 2.9 percent over the period. All other loans, which account for 7.3 percent of total loans, increased 1.8 percent over the period. During this period, total deposits at these banks increased 2.5 percent.

Agriculture and Natural Resources

As of late November, about 96 percent of the District winter wheat crop was rated in fair or better condition. On average, 81 percent of the winter wheat crop had emerged across the District. A rate slightly below the 5-year average progress rate for this time of year. The majority of the slowdown was attributed to planting delays in Illinois because of wet weather conditions in October. Year-to-date red meat production in the District was 8.7 percent lower in November 2014 than in the same month last year. This decline was driven primarily by lower production in Illinois, Indiana, and Missouri, which collectively produce around 89 percent of the District’s red meat output. Year-to-date coal production in the District was 2.8 percent higher in November 2014 than in the same month last year; coal production for November 2014 was about 3.2 percent higher than in November 2013.

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