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Eighth District - St. Louis
Beige Book
October 15, 2014

Wednesday, October 15, 2014

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Economic activity in the Eighth District has increased at a moderate pace since the previous report. Recent reports of planned activity in manufacturing and services have been largely positive. Reports from retail contacts have also been positive. Overall residential real estate market conditions have remained weak. Commercial and industrial real estate market conditions have been mixed, but commercial and industrial construction has increased. Lending activity at a sample of small and midsized District banks increased from mid-June to mid-September.

Manufacturing and Other Business Activity

Reports of plans for manufacturing activity have been largely positive since the previous report. Several manufacturing firms reported plans to add workers, expand operations, or open new facilities in the Eighth District, while a smaller number of contacts reported plans to reduce employment. Producers of construction materials, tools, consumer goods, and aviation equipment announced plans to hire new employees and expand operations in the Eighth District. In contrast, a metal products manufacturer and a food manufacturer reported plans to lay off workers and close facilities. Reports from automobile and auto parts manufacturers were positive, with District contacts reporting plans to expand operations and hire new workers.

Reports of plans in the District’s service sector have also been positive since the previous report. Firms in freight, insurance and financial, and communications services reported new hiring and expansion plans in the District. In contrast, firms in animal health services and firms in news media services announced plans to lay off employees. Reports from healthcare services firms were mixed. Anecdotal reports from retailers were mostly positive. Contacts in Memphis noted new openings or expanding operations in retail and grocery establishments. In contrast, a major nationwide retailer announced two store closures in the District.

Real Estate and Construction

Home sales decreased in the Eighth District on a year-over-year basis. Compared with the same period in 2013, August 2014 year-to-date home sales were down 3 percent in Little Rock, 2 percent in Louisville, 8 percent in Memphis, and 5 percent in St. Louis. Residential construction declined in the majority of the District’s metro areas. August 2014 year-to-date single-family housing permits decreased in the majority of the District’s metro areas compared with the same period in 2013. In particular, permits decreased 29 percent in Little Rock, 8 percent in Louisville, and 3 percent in St. Louis. In contrast, permits increased 2 percent in Memphis.

Commercial and industrial real estate market conditions were mixed throughout the District. A contact in Louisville reported an increase in prospective commercial tenants in the downtown area. A contact in Memphis noted that the Germantown commercial real estate market remains strong. A contact in Little Rock reported robust demand for commercial real estate space. Commercial and industrial construction activity improved throughout most of the District since the previous report. A contact in Memphis reported plans for a large-scale mixed-use development in the downtown area. A contact in Louisville reported the construction of a building in an industrial park in southern Indiana, with tentative plans for the construction of additional buildings. A Little Rock contact reported the redevelopment of vacant commercial real estate space in Fayetteville. Contacts in St. Louis reported the expansion of a commercial real estate development in Chesterfield and multiple plans for speculative industrial development projects across the area.

Banking and Finance

Total loans outstanding at a sample of small and midsized District banks increased 1.9 percent from mid-June to mid-September. Real estate lending, which accounts for 72 percent of total loans, increased 1.1 percent over this period. Commercial and industrial loans, which account for 16 percent of total loans, increased 2.0 percent over the period. Loans to individuals, which account for 5.3 percent of total loans, increased 4.6 percent over the period. All other loans, which account for 7.2 percent of total loans, increased 7.7 percent over the period. During this period, total deposits at these banks decreased 0.2 percent.

Agriculture and Natural Resources

As of late September, about 75 percent of the District’s corn, rice, and soybean crops was rated in good or excellent condition. Similarly, about 60 percent of the District’s pastureland was rated in good or excellent condition; Kentucky’s pastureland, in particular, has improved significantly since the previous report. Harvest completion rates across the District have lagged behind their five-year averages. District coal production for August was about 1.5 percent higher than a year ago.

Employment, Wages and Prices

Anecdotal information suggests that employment in the Eighth District grew moderately since the previous report, while wages and prices grew modestly. A contact in Louisville noted increased turnover of skilled employees who are switching to higher-paying jobs. Contacts also noted increases in the cost of lumber and other building materials, and indicated that increased demand has allowed some retail dealers of construction materials to increase prices to consumers.

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