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Eighth District - St. Louis
Beige Book
July 17, 2013

Wednesday, July 17, 2013

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The economy of the Eighth District has expanded at a moderate pace since our previous report. Recent reports of planned activity in manufacturing and services have been positive. Residential real estate market conditions have continued to improve, and commercial real estate markets have also improved. Total lending at a sample of small and midsized District banks increased from mid-March to mid-June.

Manufacturing and Other Business Activity

Reports of manufacturing activity plans have been positive since our previous report. Several manufacturing firms reported significant plans to add workers, expand operations, or open new facilities in the Eighth District, while a smaller number of manufacturers reported plans to reduce their employee count. Firms in automobile, automobile parts, lumber, bakery, petroleum refining, and firearm manufacturing plan to hire new employees and expand operations in the Eighth District. In contrast, firms that manufacture boats, housewares, turbines, and medical equipment reported plans to lay off workers in the District.

Reports of plans in the District's service sector have also been positive since the previous report. Firms in television, prescription benefits management, electronics retail, residential care, utility, consulting, and automobile sales services reported new hiring and expansion plans in District states. In contrast, firms in transportation, financial, food wholesale, healthcare, and security services plan to lay-off employees. Reports from retail contacts were generally positive. There were more new retail store openings than store closings. However, many retail contacts noted that year-to-date sales were below expectations, and contacts were cautiously optimistic about sales for the remainder of 2013. Finally, sales reports from auto dealers were generally positive, citing increased sales for new and used cars as well as plans to open new dealership locations.

Real Estate and Construction

Home sales have continued to increase throughout most of the Eighth District on a year-over-year basis. Compared with the same period in 2012, May 2013 year-to-date home sales were up 17 percent in Louisville, 24 percent in Little Rock, 8 percent in Memphis, and 14 percent in St. Louis. May 2013 year-to-date single-family housing permits increased in the majority of the District metro areas compared with the same period in 2012. Permits increased 18 percent in Louisville, 23 percent in Memphis, and 18 percent in St. Louis. Permits decreased 3 percent in Little Rock.

Commercial and industrial real estate market conditions have continued to improve moderately throughout most of the District. A contact in Memphis reported that commercial and industrial real estate activity continued to strengthen. A contact in Louisville noted a strong demand in industrial real estate. Contacts in St. Louis reported that downtown office leasing appeared to bottom out compared with last year. A contact in northwest Arkansas also reported that commercial real estate activity was moving in the right direction. Commercial and industrial construction activity continued to improve throughout most of the District. A contact in south central Kentucky reported several commercial construction plans in Bowling Green, while a contact in central Arkansas noted a few retail construction projects. In contrast, contacts in Memphis and Louisville commented that industrial construction activity was low.

Banking and Finance

Total loans outstanding at a sample of small and midsized District banks increased 1.8 percent from mid-March to mid-June. Real estate lending, which accounts for 73.4 percent of total loans, increased 0.9 percent. Commercial and industrial loans, accounting for 15.7 percent of total loans, increased 0.7 percent. Loans to individuals, accounting for 4.7 percent of total loans, increased 1.9 percent. All other loans, accounting for 6.2 percent of total loans, increased 15.3 percent. During this period, total deposits at these banks decreased 0.8 percent.

Agriculture and Natural Resources

At the end of June, the condition of over 90 percent of the cotton, corn, soybeans, sorghum, and rice crops was rated as fair or better in all the District states. Furthermore, at least 70 percent of total pastureland across the District states was rated in good or excellent condition. The winter wheat harvest was behind its 5-year average and behind the progress made by the same time last year. Year-to-date coal production for the District states at the end of May was lower than the same period last year because of lackluster production in Illinois, Missouri, Tennessee, and Indiana. In contrast, year-to-date coal production in Arkansas was 55 percent higher than the same period last year.

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