Eighth District - St. Louis
Beige Book
June 05, 2013

Audio

St. Louis Fed economist Rubén Hernández-Murillo discusses current economic conditions in the Eighth District, as published in the Beige Book.

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Economic activity in the Eighth District has expanded at a moderate pace since the previous report. Recent reports of planned activity in manufacturing and services have been positive, on net. Reports of retail and auto sales over the past three months have also been positive. Residential real estate market conditions have continued to improve, and commercial real estate markets have also improved. Lending activity at a sample of large District banks was little changed during the first quarter of 2013. Prices, wages, and employment levels over the past three months have stayed the same or increased for a majority of contacts across the District.

Consumer Spending

Contacts reported that retail sales in the past three months were up, on average, relative to the same period last year. Forty percent of contacts noted moderate increases in sales, while 40 percent noted minor decreases and the rest saw no changes. Forty percent of retailers reported that sales levels met their expectations, and the rest reported that sales fell short of expectations. About sixty percent of retailers noted that their inventories were at desired levels, while the rest reported that their inventory levels were too high. The sales outlook over the next three months was slightly positive: 40 percent of retailers expect sales to increase over 2012 levels, and the remaining contacts expect sales to stay the same. The general outlook for the retail industry over the next three months was largely positive. Contacts noted increases in new store openings, but some expressed concern about the effects of the online sales tax bill on their sales.

Reports from auto dealers about sales in the past three months were generally positive. Fifty-seven percent of the car dealers surveyed saw increases in sales, while 29 percent saw decreases and the rest saw no changes. Fifty percent of car dealers reported an increase in used car sales relative to new car sales, and 17 percent reported the opposite. About 36 percent of respondents reported that their inventories were too high, while 14 percent reported that their inventories were too low. The sales outlook for the next three months was optimistic: 64 percent of car dealers expect sales to increase over 2012 levels, while 21 percent expect sales to decrease.

Manufacturing and Other Business Activity

Reports of plans for manufacturing activity have been positive since our last report. Several manufacturing firms reported plans to add workers, expand operations, or open new facilities in the District, while a smaller number of contacts reported plans to reduce employment. Firms in automobile, automobile parts, appliance, asphalt products, plastics packaging, chemical, steel, and furniture manufacturing plan to hire new workers and expand operations. In contrast, firms in medical devices, commercial printing, and beverage manufacturing reported plans to lay off workers. A recent survey of manufacturers showed increased new orders and capacity utilization for the majority of firms.

Reports of planned activity in the District's service sector have also been positive since the previous report. Firms in information technology, financial, distribution, business support, healthcare, engineering, and hospitality services reported new hiring and expansion plans. In contrast, firms in retail and wireless communication services reported plans to reduce employment.

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, April 2013 year-to-date home sales were up 16 percent in Louisville, 32 percent in Little Rock, 7 percent in Memphis, and 13 percent in St. Louis. April 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 20 percent in Louisville, 4 percent in Little Rock, 27 percent in Memphis and 20 percent in St. Louis.

Commercial and industrial real estate market conditions have continued to improve moderately. Compared with the fourth quarter of 2012, the first quarter 2013 industrial vacancy rates declined in St. Louis and Memphis and increased in Little Rock and Louisville. During the same period, downtown office vacancy rates increased in Louisville, Little Rock, Memphis, and St. Louis, while suburban office vacancy rates declined in St. Louis and Little Rock and increased in Memphis. Contacts in central Arkansas noted large ongoing retail construction projects. Contacts in Louisville and Memphis reported build-to-suit construction plans for industrial space.

Banking and Finance

A survey of senior loan officers at a sample of large District banks found little change in overall lending activity during the first quarter of 2013. During this period, credit standards for commercial and industrial loans ranged from unchanged to eased somewhat, and the demand for such loans ranged from moderately stronger to moderately weaker. Credit standards for commercial real estate loans ranged from basically unchanged to eased somewhat, while demand ranged from mostly unchanged to moderately stronger. Credit standards for prime residential mortgage loans remained unchanged and demand ranged from unchanged to moderately stronger. Meanwhile, credit standards and demand for consumer loans remained mostly unchanged. Demand for auto loans ranged from moderately stronger to moderately weaker, while demand for other consumer loans was unchanged.

Agriculture and Natural Resources

Because of persistent rains, District farmers are behind their average planting schedules. Planting progress for cotton, rice, and soybeans in Mississippi was approximately half the 5-year average. Across all other District states, soybean planting progress was approximately 15 percent slower than its 5-year average. As of mid-May, well over 90 percent of the District's winter wheat crop was rated in fair or better condition and close to 70 percent was rated as good or excellent. Year-to-date coal production across the District states (excluding eastern Kentucky) for April was 3.3 percent lower compared with the same period in 2012, while coal output for April 2013 was similar to April 2012.

Fifty-five percent of contacts indicated that prices charged to consumers over the past three months have stayed the same, while 34 percent indicated that prices have increased relative to the same period last year. In turn, 30 percent of contacts noted that wages over the past three months have stayed the same, while 66 percent noted that wages have increased. Meanwhile, 45 percent of contacts reported that employment levels have remained the same over the past three months, while 37 percent reported that employment levels have increased, compared with the same period last year.


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