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Eighth District - St. Louis
Beige Book
June 4, 2014

Wednesday, June 4, 2014

Beige Book Archives

Burgundy Book Archives

The economy of the Eighth District has grown modestly since our previous report. Reports from retailers and auto dealers in April and early May have been generally positive. Recent reports of planned activity in manufacturing and services have also been positive on net. Residential real estate market conditions have deteriorated, and commercial real estate market conditions have improved. Lending activity at a sample of District banks has improved modestly. Wage increases have been modest, and prices and employment levels have increased slightly.

Consumer Spending

Reports from retail contacts about sales in April and early May were generally positive. Retailers generally noted that their current inventories were at desired levels. Restaurant contacts noted strong activity in that sector. A few non-restaurant retailers noted a decline in April sales this year relative to last year and stated that sales in April and the first half of May fell short of expectations. Contacts generally noted a positive economic outlook for the remainder of the spring season and the rest of 2014.

Two-thirds of auto dealers noted that, compared with the same time last year, sales increased in April and early May. One in four contacts reported decreased sales, and the remainder reported no change. Almost two-thirds of auto dealers reported no change in the mix of used-car versus new-car sales; one in four contacts reported more used-car sales, and the remainder reported more new-car sales. Similarly, almost two-thirds of contacts reported no change in the mix of high-end versus low-end vehicles; one in four contacts reported more low-end sales, and the remainder reported more high-end sales. Roughly three-fourths of contacts reported that their inventories were at desired levels, while the remainder reported that inventories were too high. The outlook for sales in the near future was mostly positive.

Manufacturing and Other Business Activity

Reports of plans for manufacturing activity have been positive since our previous report. Several manufacturing firms reported plans to add workers, expand operations, or open new facilities in the District, while a smaller number of manufacturers reported plans to reduce employment. Firms in auto parts, furniture, automobiles, pharmaceutical preparations, alcoholic beverages, aluminum products, freezers, machinery, apparel, rubber products, and dry polymer manufacturing plan to hire new employees and expand operations in the District. In contrast, firms that manufacture textiles, printing products, shoes, and television sets reported plans to lay off workers in the District.

Reports of planned activity in the District’s service sector have been positive since the previous report. Firms in telecommunication, distribution, information technology, business consulting, and courier and express delivery services reported new hiring and expansion plans in the District. In contrast, firms in data processing, disability benefit application management, mortgage, transportation, and translation and interpreting services reported plans to reduce employment.

Real Estate and Construction

Sales of new and existing homes have declined across most of the largest metro areas in the District. Compared with the same period last year, April 2014 year-to-date total home sales were down 12 percent in Little Rock, 5 percent in Louisville, 5 percent in Memphis, and 14 percent in St. Louis. Residential construction also has declined across the District. Compared with the same period last year, March 2014 year-to-date single-family housing permits decreased 26 percent in Little Rock, 17 percent in Louisville, 4 percent in Memphis, and 4 percent in St. Louis.

Commercial and industrial real estate market conditions have remained steady or have improved since the previous report. A contact in northwest Kentucky noted a steady demand for high-quality industrial and retail space. Contacts in Memphis noted reduced vacancies in the retail real estate market and a steady demand for industrial space. A contact in Little Rock reported flat commercial market conditions. A contact in St. Louis reported improvement in industrial space leasing throughout the area. Commercial and industrial construction improved throughout most of the District. A contact in Louisville reported an increase in commercial projects in the downtown area, a contact in Memphis reported a new industrial construction project on the outskirts of the city, and a contact in Little Rock noted a new commercial construction project in North Little Rock.

Banking and Finance

A survey of District banks showed modest improvement in overall lending activity since the previous report. During this period, credit standards for commercial and industrial loans eased slightly and creditworthiness of applicants improved, while demand increased and delinquencies decreased moderately. Credit standards for prime residential mortgage loans tightened slightly and creditworthiness of applicants improved moderately, while demand was moderately weaker overall, with responses ranging from moderately stronger to substantially weaker. Also, delinquencies decreased moderately. Many respondents noted regulatory challenges in the mortgage market. Credit standards for credit cards eased slightly and creditworthiness of applicants remained unchanged, while demand was moderately stronger and delinquencies decreased slightly. Credit standards for auto loans and other consumer loans showed no change, and creditworthiness of applicants improved slightly for auto loans and remained unchanged for other consumer loans; demand increased slightly and delinquencies decreased.

Agriculture and Natural Resources

As of mid-May, on average, corn planting across the District was about 81 percent complete and about 93 percent of the winter wheat crop was rated in fair or better condition. Coal production for April 2014 was 4 percent higher than in April 2013.

Prices, Wages, and Employment

A survey of Eighth District businesses indicated that, in the period since the previous report, wages grew at a modest pace while prices and employment levels increased slightly compared with the same period last year. Fifty-eight percent of contacts noted that wages have stayed the same, while 42 percent noted that wages have increased. Sixty-four percent of contacts indicated that prices charged to consumers have stayed the same, while 28 percent indicated that prices have increased and the rest noted that prices have declined. Finally, 63 percent of contacts reported that employment levels have remained the same, while 22 percent reported an increase and 15 percent reported a decline.

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