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Eighth District - St. Louis
Beige Book
June 3, 2015

Wednesday, June 3, 2015


Economic activity in the Eighth District has increased at a modest pace since the previous Beige Book. Recent reports of planned activity have been mostly positive on net with both retailers and auto dealers reporting increased sales. A survey of Eighth District businesses indicated that wages grew moderately, employment growth was modest, and prices charged to consumers were generally unchanged. Overall residential and commercial real estate market conditions improved in most parts of the District. A survey of District banks showed moderate improvement in overall lending activity. Finally, spring plantings in the southern portion of the District recovered thanks to drier weather.

Consumer Spending

Consumer spending grew at a modest rate since the previous report. In Little Rock, retailers and restaurateurs reported that seasonal sales and catering orders were higher than one year ago; a high-end jeweler reported that luxury goods are faring well and has made plans to increase inventories. In Memphis, a major sporting goods retail facility opened in late April. Multiple contacts in the hospitality industry report increasing travel demand in the District. However, the convention center in Louisville announced that it will close in late summer for two years for renovations and expansion.

Auto dealers reported increased year-over-year sales, on net. About half of dealers reported selling more high-end cars than low-end cars; the rest reported no change in the composition of automobiles sold. While a majority of auto dealers reported that sales of SUVs or trucks increased relative to other models, a sizable minority stated that low gas prices had little to no effect on overall sales.

Manufacturing and Other Business Activity

Reports of plans for manufacturing activity have been mostly positive since our previous report. Several manufacturing companies reported plans to add workers, expand operations, and/or open new facilities, while a smaller number reported layoffs. Firms in transportation equipment, furniture, food and beverage, and machinery manufacturing plan to hire new employees and expand operations. In contrast, firms that manufacture wood products and primary metals reported plans to lay off workers or close facilities. News from plastics and rubber products manufacturers was mixed, with District firms reporting both positive and negative outlooks for hiring.

Reports of plans in the District’s service sector have been mixed since the previous report. Firms that provide warehousing and storage reported new hiring and expansion plans. In contrast, several firms in air transportation and technical services plan to lay off employees. Firms that provide administrative services, truck transportation, and healthcare reported both layoffs and new hires.

Employment, Wages, and Prices

Sixty percent of contacts indicated wages were higher during the past three months than during the same period last year; the remaining contacts indicated that wages remained about the same. Half of contacts reported that employment during the past three months was unchanged from the same period last year, while 40 percent reported employment was higher or somewhat higher, and the remainder indicated a slight decline. Two-thirds of hiring managers are actively looking for employees, mainly for professional, technical, sales, and administrative positions. Fifty-eight percent of contacts reported that prices charged to customers were about the same during the past three months relative to last year, while 26 percent reported an increase in prices and 16 percent reported a decrease. The majority of contacts reported they are not raising prices to offset higher labor compensation costs.

Real Estate and Construction

Home sales increased in the Eighth District on a year-over-year basis. April 2015 year-over-year home sales were up 10 percent in Louisville, 11 percent in Memphis, and 16 percent in St. Louis. By contrast home sales decreased 8 percent in Little Rock. Contacts in the District expect the demand for single-family homes to stay the same or increase in the next quarter. Contacts noted that residential construction activity was slightly higher than in previous months and expect this trend to continue in the next quarter.

Commercial and industrial real estate market conditions were positive throughout most of the District. Contacts across the District noted tight office market conditions in class A space. Contacts in Louisville noted that many firms have outgrown their current office space and expect rent growth to accelerate in the second half of 2015. Commercial and industrial construction activity continues to be positive throughout most of the District. Contacts across the District reported an increase in speculative industrial space.

Banking and Finance

A survey of District banks showed moderate improvement in overall lending activity over the past three months. For commercial and industrial loans, credit standards eased somewhat, creditworthiness of applicants improved, demand was slightly stronger, and delinquencies were lower. For residential mortgage loans, credit standards were unchanged, demand was modestly stronger, creditworthiness of applicants improved, and delinquencies were lower. For credit cards, standards were slightly higher, demand was lower, creditworthiness of applicants was mostly unchanged, and delinquencies were lower. For auto loans, credit approval standards were unchanged, demand was unchanged to slightly higher, delinquencies were lower, and creditworthiness of applicants improved modestly.

Agriculture and Natural Resources

District agricultural bankers expect farm income, capital spending, farmland values, and cash rents to decline on a year-over-year basis in the second quarter of 2015. As of early May, District planting progress had recovered from weather-related delays experienced earlier. In particular, planting progress rates exceeded the 5-year average for corn, cotton, rice, sorghum, and soybeans. An Arkansas poultry farmer noted dark meat exports were down substantially. The farmer attributed the decline to international fears resulting from instances of the avian flu found outside of the District. District coal production continued to fall behind in April with 7.4 percent fewer tons produced than in the same month last year. Year-to-date production is 5.7 percent lower than at the same time last year.

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