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 grown at a moderate pace since the previous report. Recent reports of planned activity in manufacturing and services have been largely positive, although reports from some contacts in the retail sector have been mixed. Overall residential real estate market conditions in the District have continued to improve, and commercial and industrial real estate market conditions have also improved. Total lending at a sample of small and midsized District banks remained largely unchanged from mid-September to mid-December.
Reports of plans for manufacturing activity have been largely positive since our previous report. Several manufacturing firms reported plans to add workers, expand operations, or open new facilities in the District. Firms in automobile, silicon metal, overhead distribution products, tanker barge, primary metal, furniture supply products, fiber board, air conditioner parts, laboratory equipment, oilfield equipment, medical device, automation equipment, and railroad tie manufacturing announced plans to hire new employees and expand operations in the District. In contrast, a firm that manufactures aluminum products reported plans to close a plant and lay off workers in the District.
Reports of planned activity in the District's service sector have also been positive since the previous report. Firms in health care, online shopping, information technology, telecommunications, restaurant, distribution, and insurance services reported new hiring and expansion plans in the District. In contrast, a firm in wholesale grocery services announced plans to lay off employees. Retail contacts across the District reported openings of new facilities. Retail contacts in the Louisville area noted that sales for 2013 were mostly flat to slightly higher than those in 2012, while retail contacts in the St. Louis area noted that Black Friday sales were lower than anticipated. In Louisville, restaurant contacts noted an increase in corporate dining. In St. Louis, tourism contacts reported the closure of a hotel in the downtown area.
Home sales have continued to increase throughout most of the District on a year-over-year basis. Compared with the same period in 2012, November 2013 year-to-date home sales were up 16 percent in Louisville, 17 percent in Little Rock, 8 percent in Memphis, and 5 percent in St. Louis. November 2013 year-to-date single-family housing permits increased in the majority of the District's metro areas compared with the same period in 2012. Permits increased 8.3 percent in Louisville, 16 percent in Memphis, and 13 percent in St. Louis. In contrast, permits decreased 8 percent in Little Rock.
Commercial and industrial real estate market conditions have improved throughout most of the District. A contact in central Arkansas noted growing activity in the industrial real estate market. Contacts in both Louisville and St. Louis reported thriving downtown commercial markets. A contact in Memphis reported that office and retail vacancy rates declined during the third quarter of 2013. Commercial and industrial construction activity also improved throughout most of the District. A contact in Memphis reported a new commercial construction project in Horn Lake, Mississippi. A contact in Louisville reported construction of several new commercial buildings in the downtown area. A contact in northwest Arkansas noted an emerging market for medical office space. Contacts in St. Louis reported plans for a new commercial construction project in the midtown area, as well as multiple commercial development projects in the Grove neighborhood.
Total loans outstanding at a sample of small and midsized District banks remained largely unchanged from mid-September to mid-December. Real estate lending, which accounts for 72.9 percent of total loans, saw no change. Commercial and industrial loans, accounting for 15.6 percent of total loans, decreased 0.6 percent. Loans to individuals, accounting for 5 percent of total loans, increased 0.9 percent. All other loans, accounting for 6.5 percent of total loans, increased 0.7 percent. During this period, total deposits at these banks decreased 0.5 percent.
As of late November 2013, around 98 percent of the District's winter wheat crop was rated in fair or better condition, as 89 percent of the winter wheat crop had emerged, on average, across the District states. This rate of progress was moderately faster than the average over the past five years. Year-to-date red meat production in the District for November 2013 increased by 0.5 percent compared with the same period in 2012. Arkansas experienced a noticeable 62.3 percent decline in red meat production over the same period; however, production in Arkansas accounts for less than one percent of total red meat production in the District. Year-to-date coal production in the District for November 2013 was 3.9 percent higher compared with the same period in 2012. On a monthly basis, coal production for November 2013 was 5.7 percent higher than in November 2012.