Economic activity in the Eighth District expanded modestly since our previous survey. Reports from manufacturing continued to be positive and contacts indicated that the services sector continued to grow. Reports from contacts in residential real estate markets were mixed; similarly, commercial real estate market conditions varied across the District. Total loans at a sample of small and mid-sized District banks increased slightly from mid-June to the end of August.
Manufacturing activity in the District continued to expand since our previous survey. Several manufacturers reported plans to open plants and expand operations in the near future, while a smaller number of contacts reported plans to close plants and reduce operations. Firms in the biofuel and fabricated metal product industries reported plans to open new facilities in the District. Contacts in the machinery, food, furniture, and miscellaneous industries reported plans to expand existing facilities and operations. Firms in the nonmetallic mineral and paper product industries reported plans to hire additional workers. In contrast, contacts in the motor vehicle parts industry reported plans to lay off workers and decrease operations, and a firm in the computer equipment industry announced that it will close a plant in the District.
The District's services sector continued to expand. Firms in the freight transportation, recreation, and professional business services industries reported plans to build new facilities and expand operations. In contrast, a firm in the business support services industry reported plans to close a facility in the District. Car dealers in the District reported that sales from late August through early September were down, on average, over year-earlier levels. Sales of domestic cars and sport utility vehicles were particularly slow.
August year-to-date home sales were mixed throughout the Eighth District. Home sales increased 11 percent in Memphis and were relatively unchanged in Louisville compared with the same period in 2005. August year-to-date home sales declined about 2 percent in both St. Louis and Little Rock. Residential construction remained weak throughout the District. August year-to-date single-family housing permits were down in nearly every metro area. Compared with the same period last year, permits fell 34 percent in Louisville, 21 percent in greater St. Louis, 11 percent in Memphis, and 8 percent in Little Rock. Permits, however, increased 12 percent in Jackson, Tennessee, and 2 percent in Fayetteville, Arkansas.
Commercial real estate market conditions continued to be mixed throughout the District. In Little Rock, the second-quarter 2006 industrial vacancy rate increased slightly, the downtown office vacancy rate decreased, and the suburban office vacancy rate increased. Contacts in east Memphis reported high demand for Class A office space. Contacts in Little Rock reported that several large construction projects are expected or underway. Contacts in northeast Arkansas reported that commercial building remains slow, while contacts in Madison County, Tennessee, reported that commercial construction is booming. In St. Louis, contacts reported that new industrial construction is vibrant.
Total loans outstanding at a sample of small and mid-sized District banks showed a modest increase of 0.6 percent from mid-June to the end of August. Real estate lending, which accounts for 71.9 percent of total loans, increased 0.4 percent. Commercial and industrial loans, accounting for 18.0 percent of total loans, increased 1.1 percent. Loans to individuals, accounting for 4.3 percent of total loans, fell 0.7 percent. All other loans, roughly 5.8 percent of total loans, increased 1.8 percent. Over this period, total deposits at these banks increased 1.4 percent.
Ample rainfall in much of the District since August slowed harvesting progress in some areas. The District's overall corn harvest is behind its average pace by 14 percent because of slower-than-normal paces in Illinois, Indiana, and Kentucky; the soybean harvest is behind by 20 percent because of slower-than-normal paces in Illinois, Indiana, Kentucky, and Missouri; and the sorghum harvest is behind by 4 percent because of the slower-than-normal pace in Illinois. In contrast, the cotton harvest in Arkansas and Mississippi is ahead of its normal pace by 88 percent, while the rice harvest is ahead by 12 percent. The rain improved pasture conditions in all District states, but at least one-third of the pastures in Arkansas, Mississippi, Missouri, and Tennessee still remain in poor condition.