December 5, 1984
Summary
The Eighth District economy has experienced slight reductions in
employment levels recently and at least one District state has seen
a small rise in unemployment. Though retailers continue to expect a
good Christmas season, forecasts for sales through the end of the
year have been revised downward. Lower interest rates have spurred
small gains in residential construction levels. Total loan growth
has increased recently, especially among commercial and industrial
loans and consumer loans. Prices of District agricultural
commodities remain weak as marketings continue to be sufficient to
meet current demand.
Outlook
Most respondents in the Eighth District expect little change in
business conditions through mid-1985. They expect the real volume of
sales to go up slightly in the next three months, but plan to keep
price and employment levels unchanged.
Consumer Spending
Retailers continue to expect a good Christmas season though not as
robust as forecasted last summer. Sales of durable goods in Memphis
were up significantly in early November, while retail sales in
eastern Arkansas were considerably above last year's level. Auto
sales for early November in the District were just slightly above
November 1983 levels.
Employment
Employment levels in the District have declined slightly in recent
weeks as several District firms have laid off workers. A major
appliance producer in Kentucky laid off 1,400 production workers and
will phase out nearly 300 white collar positions. Kentucky also
recently experienced the loss of approximately 900 jobs in the
cigarette manufacturing industry. Arkansas lost approximately 2,600
employees in the textile, metal and communications industries. Its
unemployment rate rose 0.2 percent to 8 percent in October, but
remained below the 8.3 percent rate of October 1983.
Business Activity
General business activity, as defined by an index of seven
indicators, has slowed in Arkansas from a 4 percent annual rate of
growth in September to a 2 percent rate in October. Business
activity in Missouri declined at a 6 percent rate in October,
following a 1 percent rate of increase for the month of September.
Construction
Housing sales in the District, which have been stable in recent
months, seem to be picking up again on a seasonally adjusted basis.
Housing market observers expect further improvement through the end
of the year due to the recent fall in interest rates. Multi-family
housing construction has been particularly strong in the St. Louis
and Memphis areas.
Banking
The growth of total loans outstanding at large weekly reporting
banks has picked up after a lull in recent months. The annual growth
rate for the four-week period ending November 14 was 12 percent over
the previous four-week period. Strong seasonal growth in commercial
and industrial loans and consumer loans accounted for the overall
increase. The growth of loans to financial institutions and real
estate loans was flat. Total deposit growth slowed to a 5 percent
annual rate, down from 17 percent a month earlier. All deposit
categories experienced slower growth, while large denomination CD
levels declined sharply.
Agriculture
Red meat producers, who had expected sharp price increases during
the second half of 1984, continue to be disappointed by price
weakness. Cattle prices have been pressured by a 7 percent increase
in cattle on feed and a 2 percent increase in marketings over
October 1983. Competition from a 5 percent increase in broiler
production has prevented sharp increases in hog prices even though
hog slaughter in October was 12 percent lower than a year ago.
Corn and soybean prices have declined in response to better estimates of this year's harvests. Large foreign and U.S. cotton crops and weak demand suggest further price declines in this market. Little evidence is available to suggest substantial price increases for any of these commodities in 1985.