Despite contrary changes in some sectors, the economy of the Eighth District expanded modestly since our previous report. Contacts in manufacturing reported a softening in activity, while the services sector continued to grow. Home sales declined in most District areas, while commercial real estate market conditions firmed throughout the District. Total loans at a sample of small and mid-sized District banks increased slightly between early October and late December.
Manufacturing activity slowed 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 chemical and plastic products industries reported plans to open new plants in the District and a contact in the coal mining industry reported plans to expand existing operations. In contrast, contacts in the audio and video equipment, motor vehicle parts, wood products, primary metal, and nonmetallic mineral products industries announced plans to close plants in the District. An additional firm in the audio and video equipment industry reported plans to only lay off workers.
The District's services sector continued to expand in most areas. Firms in the newspaper publishing, data processing, educational services, and administrative and support services industries reported plans to build new facilities and expand operations. In contrast, contacts in the telecommunications and spectator sports industries announced plans to lay off a small number of workers. Reports from retailers have been positive since our previous report. December 2006 sales of clothing and sporting goods were cited as particularly strong when compared with year-earlier sales. One discount department store announced plans to open a new facility in the District. Another department store, however, announced plans to close a facility in the District. Car dealers reported that fourth quarter sales in 2006 were down, on average, compared with year-ago levels. While sales of used cars improved slightly, sales of new cars were particularly slow.
Home sales declined throughout most of the Eighth District. Compared with the same period in 2005, November 2006 year-to-date home sales were up 7 percent in Memphis but fell 4 percent in St. Louis, 2 percent in Little Rock, and 1 percent in Louisville. Residential construction also declined throughout the District. November 2006 year-to-date single-family housing permits fell in every metro area compared with the same period in 2005. Permits declined 30 percent in Louisville, 24 percent in St. Louis, 11 percent in Memphis, and 10 percent in Little Rock.
Commercial real estate markets seem to be firming throughout the District. The 2006 third quarter industrial vacancy rate in Little Rock declined from the second quarter of 2006. Contacts in Memphis report that the office market is tight, and vacancies are at a three-year low. Contacts in Louisville report that overall demand for office space is steady. In Little Rock, contacts report that commercial construction is running strong. Contacts in Louisville report that both the industrial leasing and construction markets are steady.
Total loans outstanding at a sample of small and mid-sized District banks increased 0.6 percent between early October and late December. Real estate lending, which accounts for approximately 72.2 percent of total loans, increased 0.4 percent. Commercial and industrial loans, accounting for 17.3 percent of total loans, increased 1.5 percent. Loans to individuals, accounting for 4.3 percent of total loans, increased 0.2 percent. All other loans, roughly 6.2 percent of total loans, increased 1.0 percent. Over this period, total deposits at theses banks decreased 1.6 percent.
Higher-than-normal temperatures and precipitation in December helped improve soil moisture and pasture conditions in many District areas. By year-end 2006, winter wheat was mostly in good condition, although some farmers in Arkansas, Indiana, and Missouri reported some damage to the crop because of standing water in the fields. As of mid-December 2006, year-to-date bales of cotton ginned (separated from the seed) were up 6 percent over the same period in 2005. Total commercial red meat production increased by 16 percent in November 2006 over year-earlier levels, and the total weight of young chickens slaughtered was 1 percent lower for the same period. Total District coal production for December 2006 was 2 percent higher than a year ago, and coal production for all of 2006 increased by 1 percent over 2005 levels.