Eighth District - St. Louis
Beige Book
March 4, 2015

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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Summary

Economic activity in the Eighth District has increased at a moderate pace since the previous Beige Book. Recent reports of planned activity in manufacturing and services have been positive on net. Reports from retail contacts have also been positive. Overall residential real estate market conditions have improved, while commercial and industrial real estate markets and construction have been mixed. Lending activity during the past three months has increased at a sample of District banks. Over the past three months, compared with the same period a year ago, wages have grown moderately while employment and prices charged to consumers have grown modestly.

Consumer Spending

Retail contacts in the District noted that sales during the first two months of 2015 have stayed the same or increased relative to a year ago. The majority of retail contacts noted that sales were in line with expectations

Reports from auto dealers were also generally positive. Contacts noted that auto sales during the first two months of 2015 have stayed the same or increased, compared with same period last year. Approximately half of auto dealers contacted reported that, relative to a year earlier, sales shifted toward new vehicles from used vehicles; the other half of contacts were split between no change and more used car sales. Similarly, contacts also noted that more high-end cars have been sold than low-end cars, compared with a year ago.

Manufacturing and Other Business Activity

Reports of plans for manufacturing activity since the previous Beige Book have been positive on net. Producers in the apparel, automobile, aerospace, and chemical manufacturing industries announced plans to hire additional employees and expand operations in the District. In contrast, firms that manufacture electronic equipment and primary metals announced plans to lay-off workers or close facilities. Hiring reports from food manufacturers were mixed. A recent survey of manufacturers indicated that most firms increased employment during the past three months, and average wages per employee also increased for the majority of firms surveyed.

Reports of plans in the District’s service sector have been positive since the previous report. Firms that provide business support, air and truck transportation, recreation, and health care and social assistance services reported new hiring and expansion plans in the District. In contrast, firms in publishing services plan to lay-off employees. Firms in educational services reported both layoffs and new hires.

Real Estate and Construction

Home sales increased in the Eighth District on a year-over-year basis. Compared with the same period in 2013, December 2014 monthly home sales were up 5 percent in Louisville, 11 percent in Little Rock, and 29 percent in St. Louis; home sales remained the same in Memphis. December 2014 monthly single-family housing permits increased in the majority of the District metro areas compared with the same period in 2013. Permits increased 26 percent in Louisville, 49 percent in Little Rock, 13 percent in St. Louis, and 17 percent in Memphis.

Commercial and industrial real estate market conditions were mixed throughout most of the District. Contacts in northwest Kentucky reported that a limited supply of commercial real estate is resulting in upward pressure on prices and declining vacancy rates across most property types. Contacts in Memphis reported low industrial vacancy rates. Contacts in Little Rock reported low asking rents in the commercial market. Commercial and industrial construction activity was mixed throughout most of the District. Contacts in northwest Kentucky noted that financing and regulatory constraints are increasing the costs of new commercial construction projects. A contact in Memphis reported improvements in the lending environment for commercial construction projects. Contacts in St. Louis continued to report new large multi-family construction projects in the downtown area. Similarly, contacts in Little Rock noted an increase in multi-family construction projects.

Banking and Finance

A survey of District banks showed that overall lending activity during the past three months increased moderately. For commercial and industrial loans, credit standards continued to be slightly lower, creditworthiness of applicants improved, demand was stronger, and delinquencies were lower. For standard residential mortgage loans, credit standards were mostly unchanged, creditworthiness of applicants improved, demand was somewhat stronger, and delinquencies were slightly lower. For credit cards, standards were unchanged to slightly lower, creditworthiness of applicants was slightly higher, demand was unchanged, and delinquencies were lower. For auto loans and other consumer loans, creditworthiness of  applicants was unchanged, demand was unchanged to slightly higher, and delinquencies were lower; credit standards decreased slightly for auto loans and remained unchanged for other consumer loans.

Agriculture and Natural Resources

As of early February, close to 90 percent of the District winter wheat crop was rated in fair or better condition. Total District red meat production during 2014 was largely the same compared with 2013. Missouri exhibited strong production increases in 2014, offsetting decreases observed in other District states. District coal production for January 2015 was about 1.6 percent higher than in January 2014.

Employment, Wages, and Prices

A survey of District businesses indicated that, over the past three months, wages grew moderately while employment and prices charged to consumers grew modestly compared with the same period last year. For employment levels, 56 percent of contacts reported that they have stayed the same compared with the same period last year, 35 percent reported a slight increase, and 9 percent indicated a slight decrease. For prices charged to customers, 56 percent of contacts reported that they have stayed the same compared with the same period last year, 33 percent reported an increase, and 11 percent reported a decrease. Finally, for wages, 51 percent of contacts indicated that they have stayed the same compared with the same period last year, and 46 percent indicated they were higher.

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