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St. Louis Fed economist Rubén Hernández-Murillo discusses current economic conditions in the Eighth District, as published in the Beige Book.
The economy of the Eighth District has continued to grow at a modest pace since our previous survey. Residential real estate market conditions have improved moderately. Similarly, commercial real estate market conditions have also improved. Retail and auto sales in April and early May increased over year-earlier levels. In contrast, recent reports of plans from firms in the manufacturing and services sectors were mixed. Reports of lending activity at a sample of large District banks during the first quarter of 2012 were somewhat mixed.
Contacts reported that retail sales in April and early May were up slightly, on average, over year-earlier levels. About 60 percent of the retailers reported increases in sales, while 12 percent saw decreases and 28 percent saw no changes. Thirty-seven percent of the retailers noted that sales levels met their expectations, 42 percent reported that sales were below expectations, and 21 percent reported that sales were above expectations. Twenty percent of the retailers noted that their inventories were too high, while 12 percent indicated that their inventories were too low. The sales outlook for the summer was positive: 56 percent of the retailers expect sales to increase over 2011 levels, while 24 percent expect sales to decrease and 20 percent expect sales to be similar to last year's sales.
Car dealers in the District reported that sales in April and early May were up, on average, compared with last year. About 64 percent of the car dealers surveyed saw increases in sales, while 24 percent saw decreases and 12 percent saw no changes. Twenty percent of the car dealers noted that new car sales had increased relative to used car sales, while 20 percent reported the opposite. Also, roughly 28 percent of contacts reported an increase in sales of low-end vehicles relative to high-end vehicles, while about 12 percent reported the opposite. Forty percent of the car dealers surveyed reported that their inventories were too low, while about 8 percent reported that their inventories were too high. The sales outlook for June and July was optimistic: 88 percent of the car dealers expect sales to increase over 2011 levels, while just 8 percent expect sales to decrease and 4 percent expect sales to be similar to last year's sales.
Reports of plans for manufacturing activity have been mixed since our previous report. Several manufacturers reported plans to open plants and hire workers, while a similar number of contacts reported plans to close plants and lay off workers in the near future. Firms in the paper product, agriculture, chemical, paint, and military and police equipment manufacturing industries reported plans to decrease existing operations or close plants in the District. In contrast, contacts in the automobile parts, wood product, solar panel, and steel product manufacturing industries reported plans to hire workers and increase operations.
Reports of planned activity in the District's service sector also have been mixed since our previous survey. Contacts in air transportation support, travel, and religious organization services announced plans to lay off workers and reduce operations in the District. In contrast, firms in software development services announced plans to hire additional workers and expand operations.
Home sales increased throughout most of the Eighth District on a year-over-year basis. Compared with the same period in 2011, April 2012 year-to-date home sales were up 13 percent in Louisville, 3 percent in Little Rock, 20 percent in Memphis, and 18 percent in St. Louis. Residential construction increased in the majority of the District over this time period. April 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 35 percent in Louisville, 20 percent in Little Rock, 31 percent in Memphis, and 28 percent in St. Louis.
Commercial and industrial real estate conditions have continued to improve throughout most of the District. Contacts in Louisville reported that the increase in office real estate activity slowed during April, but overall performance in the first quarter of 2012 remained strong. A contact in St. Louis reported strong commercial real estate activity and weak industrial real estate activity in the first quarter of 2012. Commercial and industrial construction activity improved moderately throughout most of the District. Contacts in south central Kentucky noted that new large commercial construction projects have been undertaken, and a contact in Louisville reported plans for speculative industrial construction. A contact in Pine Bluff, Arkansas, reported some new large commercial construction plans. A contact noted a few large industrial construction plans in Wentzville, Missouri, and some commercial and industrial construction plans in Jefferson County, while a contact in St. Louis reported steady commercial construction activity.
A survey of senior loan officers at a sample of large District banks indicated moderate changes in overall lending activity during the first quarter of 2012. During this period, credit standards for commercial and industrial loans remained unchanged, while demand for such loans was moderately stronger. Credit standards for commercial real estate loans generally remained unchanged. Demand for commercial real estate loans ranged from unchanged to substantially stronger. Meanwhile, credit standards for consumer loans ranged from basically unchanged to somewhat eased, while demand ranged from moderately weaker to moderately stronger. Respondents noted that credit standards for prime residential mortgage loans remained unchanged, while demand for these loans ranged from about the same to substantially stronger.
Crop moisture levels from April to mid-May were classified as slightly dry to favorably moist in most of the District except southern Arkansas and most of Mississippi. Rates of completion for the planting of corn, cotton, rice, sorghum, and soybeans were at least 15 percentage points higher than their 5-year average rates in most District states, while crop emergence was also ahead of schedule. More than 88 percent of the winter wheat crop was rated as fair or better, while 77 percent or more of pasture land was also similarly rated in all District states. The District's year-to-date coal production for early May was 3.8 percent lower compared with the same period last year. Similarly, the District's coal production for April 2012 was 2.6 percent lower than in April 2011.