The economy of the Eighth District has expanded at a modest pace since the previous report. Retail activity has improved modestly. Recent reports of planned activity in manufacturing and services have been positive on net. Residential real estate market conditions have remained weak and commercial real estate market conditions have been mixed since the previous report. Lending activity at a sample of District banks has increased slightly or remained stable. Finally, wages and employment levels have grown modestly, while prices have increased moderately.
Anecdotal reports from retailers indicated modestly improving conditions. Roughly 40 percent of the retailers surveyed anticipate third-quarter sales to be similar to a year ago, and 40 percent anticipate higher or somewhat higher sales. The majority of respondents report that third quarter sales are on pace to meet or exceed expectations. The outlook for fourth-quarter sales among retailers was also positive. Roughly half of contacts expect fourth quarter sales to be at least somewhat higher than the same period last year, while a third expect sales to be similar to the same period last year.
Anecdotal reports from auto dealers were also positive. About half of the auto dealers surveyed anticipate third-quarter sales to be similar to a year ago and the other half expect higher or somewhat higher sales. The majority of auto dealers reported that more low-end cars have been sold relative to high-end cars. Half of the contacts reported that their inventories are too high, but most others reported that inventories are at their desired levels. Contacts anticipate stable or improved sales in the fourth quarter compared with a year ago.
Reports of planned manufacturing activity since the previous Beige Book have been positive on net. Several manufacturing companies reported plans to add workers, expand operations, or open new facilities in the District. Producers of steel, pet food, plastics, lighting products, consumer goods, and industrial appliances plan to hire additional employees and expand operations in the District. In contrast, firms that manufacture tools and light machinery reported plans to lay off workers and close facilities. Reports from auto parts manufacturers were mixed.
Recent reports of planned activity in the District's service sector have also been positive on net. Firms in healthcare, finance, retail, transportation, and telecommunications services reported new hiring and expansion plans. In contrast, firms in food, information technology, and news media services announced plans to lay off employees.
Home sales decreased in the Eighth District on a year-over-year basis. Compared with the same period in 2013, July 2014 year-to-date home sales were down 3 percent in Louisville, 4 percent in Little Rock, 6 percent in Memphis, and 4 percent in St. Louis. Residential construction declined in the majority of the District's metro areas. July 2014 year to date single family housing permits decreased in the majority of the District metro areas compared with the same period in 2013. Permits decreased 14 percent in Louisville, 29 percent in Little Rock, and 1 percent in St. Louis. Permits showed no change in Memphis.
Commercial and industrial real estate market conditions in the District have been mixed. Contacts in Louisville reported weak demand for downtown office space, while contacts in St. Louis reported increasing demand for office space and a scarce supply of commercial real estate space. Contacts in Memphis reported stable office vacancy rates and a decrease in both retail and industrial vacancy rates. Commercial and industrial construction activity improved throughout most of the District. Contacts in Louisville reported the return of large-scale construction with two new retail projects in the area. A contact in Little Rock reported a new industrial facility under construction in southwest Arkansas. Contacts in Memphis reported the redevelopment of an uptown building into mixed-use space, and contacts in St. Louis reported construction of a large industrial building on a speculative basis.
A survey of District banks showed that overall lending activity during the past three months was unchanged to slightly higher. For commercial and industrial loans, credit standards eased slightly over this period, creditworthiness of applicants improved modestly, demand was stronger, and delinquencies were largely unchanged. For prime residential mortgage loans, credit standards remained basically unchanged, creditworthiness of applicants improved moderately, demand was unchanged to somewhat lower, and delinquencies were largely unchanged. For credit cards, both credit standards and creditworthiness of applicants showed no change during the period, demand was moderately stronger, and delinquencies were unchanged. Finally, for auto loans and other consumer loans, credit standards eased slightly, creditworthiness of applicants improved slightly, demand increased slightly, and delinquencies decreased slightly.
As of mid-August, around 73 percent of the District corn, rice, and sorghum crops was rated in good or excellent condition. In contrast, only 56 percent of District pasturelands was rated in good or excellent condition. District farmers will likely produce close to 9 percent less corn in 2014 than in the previous year. However, District rice, cotton, and sorghum production will be 34 percent, 17 percent, and 11 percent higher than last year, respectively. District coal production for July 2014 was about 10 percent higher than in July 2013. Coal production year-to-date is 1.3 percent higher than the corresponding period a year-ago.
A survey of Eighth District businesses indicated that, over the past three months, employment levels and wages have grown at a modest pace while prices have increased moderately compared with the same period last year. Sixty-one percent of contacts reported that employment levels have stayed the same relative to the same period a year ago, while 31 percent reported a slight increase and 8 percent reported a slight decrease. Sixty percent of contacts reported that wages have stayed the same, while 37 percent reported a moderate increase and 2 percent reported a slight decrease. Finally, 62 percent of contacts reported that prices have stayed about the same relative to a year ago, while 31 percent reported an increase and 7 percent reported a decrease.