St. Louis Fed economist Rubén Hernández-Murillo discusses current economic conditions in the Eighth District, as published in the Beige Book.
Economic conditions in the Eighth District have continued to improve since our previous report. Manufacturing activity increased, on balance, as did activity in the services sector. Auto sales increased over a year ago. Residential real estate market conditions continued to improve across the District's largest metropolitan areas, while commercial and industrial real estate markets remained weak, especially construction. Overall lending activity at a sample of small and mid-sized banks in the District decreased from early April to late June
Manufacturing activity has continued to increase 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 close plants and reduce operations. Firms in the furniture, plastics product, metal pipe, and plastics resin manufacturing industries announced plans to expand operations and hire new employees. Additionally, a major firm in the automobile manufacturing industry announced the opening of a new production facility. In contrast, firms in the motor and generator, furniture, and polystyrene foam product manufacturing industries announced that they will close plants in the District and lay off workers.
Activity in the District's services sector has also increased since our previous report. A major software publishing firm has announced plans to open a new facility in the District and hire new workers. Additionally, a firm in nursing care services announced plans to relocate their headquarters to the District. In contrast, contacts in education services, air transportation support services, and the casino industry announced plans to decrease operations and lay off workers. Sales of new and used automobiles in recent weeks were reported as higher than a year ago and slightly above expectations.
Home sales continued to improve throughout the Eighth District. Compared with the same period in 2009, May 2010 year-to-date home sales were up 3 percent in Memphis, 12 percent in St. Louis, 19 percent in Little Rock, and 30 percent in Louisville. Residential construction also continued to improve throughout the District. May 2010 year-to-date single-family housing permits were up in most District metro areas compared with the same period in 2009. Permits increased 27 percent in Louisville, 31 percent in Little Rock, 36 percent in St. Louis, and 52 percent in Memphis.
Commercial and industrial real estate market activity remained slow throughout most of the District. Contacts noted that financing requirements for new construction remained stringent and lease rates remained low. A contact in St. Louis reported that commercial leasing was up in some areas, but new commercial construction projects are not expected before mid-2011. Industrial real estate and construction contacts throughout the District continued to report a flat environment. A contact in Louisville reported that demand for industrial real estate continued to be weak. A contact in the Memphis area reported that while industrial leasing has improved somewhat, no new industrial construction is likely before the end of the year.
Total loans outstanding at a sample of small and mid-sized District banks decreased 2.0 percent from early April to late June. Real estate lending, which accounts for 73.6 percent of total loans, decreased 1.9 percent. Commercial and industrial loans, accounting for 16.0 percent of total loans, decreased 2.5 percent. Loans to individuals, accounting for 5.3 percent of total loans, decreased 6.5 percent. All other loans, roughly 5.1 percent of total loans, increased 4.1 percent. During this period, total deposits at these banks decreased 1.2 percent.
Generally, development of the District's major crops remained ahead of its 5-year average pace. In mid-July, the overall condition of rice and cotton was rated as slightly better than last year, while the condition of corn, sorghum, and soybeans was rated as slightly worse. Farmers in the District states planned to harvest more acres of corn for grain and rice in 2010 than in 2009 but fewer acres of soybeans and sorghum for grain. The winter wheat harvest was complete or nearly complete in all District states. Based on July estimates, total winter wheat production in the District states was expected to be down 48 percent from last year. Since our previous report, pasture conditions deteriorated in most District states.