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Eighth District - St. Louis
Beige Book
July 18, 2012

Wednesday, July 18, 2012

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The economy of the Eighth District has continued to expand at a modest pace since the previous survey. Residential real estate market conditions have continued to improve moderately. Similarly, commercial real estate market conditions have also improved. Recent reports of planned activity from manufacturing firms have been positive. However, reports from services contacts have been mixed. Overall lending at a sample of small and mid-sized District banks increased slightly from mid-March to mid-June.

Manufacturing and Other Business Activity

Reports of plans for manufacturing activity have been positive 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 decrease operations and lay off workers. Firms in auto, appliance, wall coverings, stone wool insulation, food, construction machinery, factory components, and packaging and label manufacturing reported plans to hire new workers, expand operations, and build new plants. In contrast, a window coverings manufacturing firm reported plans to lay off workers.

Reports of planned activity in the District's service sector have been mixed since our previous report. Firms in medical transportation services, waste management services, and business support services, as well as a nonprofit organization, announced plans to expand operations and hire new workers. In contrast, contacts in newspaper publishing, telecommunications services, educational services, and a firm in merchant transaction services announced plans to lay off workers. General retailers have reported stronger sales recently, while auto dealers have reported year-over-year increases in sales, especially in certain foreign and luxury brands.

Real Estate and Construction

Home sales increased throughout most of the Eighth District on a year-over-year basis. Compared with the same period in 2011, May 2012 year-to-date home sales were up 15 percent in Louisville, 7 percent in Little Rock, 21 percent in Memphis, and 19 percent in St. Louis. Residential construction increased in the majority of the District over the same period. May 2012 year-to-date single-family housing permits increased in the majority of the District metro areas compared with the same period in 2011. Permits increased 45 percent in Louisville, 26 percent in Little Rock, 41 percent in Memphis, and 25 percent in St. Louis.

Commercial and industrial real estate conditions continued to improve moderately throughout most of the District. A contact in northwest Arkansas reported strong commercial and industrial real estate activity, while a contact noted weak demand for office space in the Fayetteville area. A contact in Louisville reported strong leasing activity for premium-quality office space in Louisville's central business district, while office vacancy rates were mixed in other submarkets in Louisville. A contact reported decreases in office and industrial vacancy rates in downtown St. Louis. A contact in northeast Arkansas reported strong office leasing activity in the Jonesboro area. Commercial and industrial construction activity also continued to improve moderately throughout most of the District. Contacts in St. Louis reported some new commercial and large industrial construction projects. Contacts in Memphis reported that a few large commercial and industrial construction projects are under way in Shelby County.

Banking and Finance

Total loans outstanding at a sample of small and mid-sized District banks increased 0.7 percent from mid-March to mid-June. Real estate lending, which accounts for 73.3 percent of total loans, increased 0.6 percent. Commercial and industrial loans, accounting for 15.8 percent of total loans, decreased 2.0 percent. Loans to individuals, accounting for 4.7 percent of total loans, increased 0.3 percent. All other loans, accounting for 6.2 percent of total loans, increased 9.7 percent. During this period, total deposits at these banks decreased 0.6 percent.

Agriculture and Natural Resources

As of the end of June, the majority of cotton, corn, soybean, sorghum, and rice crop conditions were rated as fair or better in all District states with the exception of sorghum crop conditions in Illinois. Winter wheat harvests were either complete or close to completion, and more than 88 percent of the crop conditions were rated as fair or better. However, the fraction of pasture and range in good condition or better decreased in all District states since the previous report. The District's year-to-date coal production for the end of June was 4.8 percent higher compared with the same period last year. However, the District's coal production for June 2012 was 5 percent lower than in June 2011.

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