December 6, 1983
Overview
Reports from the Tenth District indicate a continuation of favorable
economic conditions. Retail sales have moderated somewhat, but
remain strong, with little upward movement in prices. Prices of
industrial inputs also are little changed. Inventories of retail
goods and of industrial inputs are regarded as satisfactory. Housing
starts have leveled off while home sales have slowed. Savings
inflows at savings and loan associations have increased, but
mortgage demand has declined. Tenth District banks report a slight
rise in deposits and generally stable loan demand. Marketing of fall
harvested crops is slow, with many farmers apparently holding their
crops in anticipation of higher prices.
Retail Trade
Retailers surveyed report that year-to-date total sales are up 5 to
20 percent over 1982 levels. Growth in sales, however, has slowed
slightly in the past three months. Virtually all of the retailers
contacted are satisfied with present inventory levels and none
intend to start clearance sales earlier than in the past. A large
number of respondents indicated that they raised prices slightly on
some items during the past three months, but most of these increases
were seasonal in nature. Almost all are optimistic about the sales
outlook for the upcoming Christmas season.
Purchasing Agents
Most purchasing agents contacted report input price increases of
between 2 and 6 percent over last November, although some report no
change or even moderate declines. Few report significant price
changes over the past three months. None of the agents contacted
expects significant price increases before yearend; however, a few
anticipate price increases very early in 1984. With one exception,
purchasing agents report no availability problems, but several
report some lengthening in lead times. Most firms are satisfied with
current inventory levels and do not plan any changes in the next few
months.
Housing Activity and Finance
Home builders report that housing starts continue to outpace 1982
levels. Starts appear to be leveling off, however. Recent inventory
increases in the multifamily and $100,000+ single family categories,
along with the onset of inclement weather, are in part responsible.
Sales also are slowing. Reduced foot traffic by potential buyers and
recent price increases are cited as contributing factors. The
leveling off of starts and slowdown in sales have improved the
outlook for materials. Builders foresee no shortages or price
increases for materials through the first quarter of 1984. Most
savings and loan associations report continued improvement in
savings inflows. Some attribute this to more aggressive, competitive
bidding for funds. Demand for mortgage funds and commitments has
fallen from its peak in mid-summer, largely for seasonal reasons.
Most savings and loans expect a slowdown until next spring, when
anticipated lower mortgage rates and pent up demand should bring new
homeowners into the market. Mortgage rates have been fairly steady
and are expected to remain so for the rest of 1983.
Agriculture
The harvesting of row crops is virtually complete throughout the
Tenth District. Winter wheat conditions across the District range
from good to excellent. Planting from fencerow to fencerow is
reported in some areas, indicating low participation by farmers in
the 1984 Payment-In-Kind (PIK) program for wheat. Winter wheat
pasture is in excellent condition, but some District bankers report
a shortage of cattle to place on the pasture. Marketing of fall
harvested row crops is reported to be slow, with many farmers
holding their crops in storage in anticipation of higher prices. The
selling of feeder cattle throughout the District is reported to be
at normal levels. An average number of cattle have been sold while a
larger proportion of calves than usual are expected to be held
through the winter by ranchers. Some liquidation of gilts and sows
is reported to be occurring in isolated areas of the Tenth District,
but hog producers generally appear to be retaining breeding herds in
anticipation of improved prices. Some paydowns by farmers are being
made on their agricultural production loans, but the major part of
the activity is expected to occur in December and in early 1984.
Thus, it is too early to assess the impact of PIK payments on loan
paydowns.
Banking
Tenth District banks report little growth in loan demand since the
last Beigebook survey. Real estate, agricultural, commercial, and
industrial lending are generally unchanged from last month. Only
consumer lending increased Districtwide. Most bankers do not expect
loan demand to rebound in the near future on grounds that the Tenth
District, which entered the recession late, has entered the recovery
late. The prime lending rate at Tenth District banks is 11 to 11 1/2
percent, unchanged from last month. Deposits at Tenth District banks
grew slightly last month. Money market deposit accounts are
responsible for nearly all of the growth. Demand deposits, NOW
accounts, Super NOW's, passbook savings accounts, and large CD's
remained constant. Responding banks report that the deregulation of
time deposits on October 1 is having little impact on small-denomination time deposits, which grew only slightly last month. In
regard to the imminent switch to contemporaneous reserve accounting,
most Tenth District bankers anticipate little difficulty in
complying with the new procedures.