May 6, 1985
Overview
Modest growth continues to be evident in the Tenth District economy.
Retail sales are up slightly and prices remain generally stable.
Inventories are generally viewed as satisfactory, both at retail and
for production materials. Housing starts continue to be off slightly
from a year ago. Mortgage rates are constant to slightly lower, and
are expected to remain stable or decline slightly. The winter wheat
crop is reported in good to excellent condition. Liquidations of
farm businesses continue to be greater than normal in number. Bank
loan demand is mixed while deposits are growing slightly.
Retail trade
Most retailers report that sales are up slightly over year-ago
levels. Sportswear and women's apparel are selling well, but sales
of home furnishings, appliances, and electronics items are
relatively weak. Retail prices have remained stable during the past
three months. Retailers are generally satisfied with current
inventory levels and expect little adjustment in the months ahead.
Prices are expected to remain stable over the remainder of the year,
while sales are expected to increase slightly.
Automobile dealers
Automobile dealers report that sales are unchanged to slightly
improved from a year ago. Recent declines in interest rates have had
some positive impact on sales. Inventories of foreign cars are in
short supply, while overall inventories of domestic cars are at
satisfactory levels. Most dealers are moderately optimistic that
1985 sales will be slightly improved over the strong 1984
performance.
Purchasing agents
Purchasing agents report that input prices have remained fairly
constant during the past three months. The changes in input prices
for the past 12 months have varied in the range of plus-or-minus 5
percent. Input prices are expected to remain stable for the rest of
the year. No difficulties in obtaining materials have been
experienced and none are expected. Inventory levels are generally
satisfactory although some modest rising is occurring, partly in
response to seasonal factors.
Housing activity and finance
Homebuilders report that housing starts are off slightly to off
sharply from a year ago. Housing starts are tracking the sale of new
homes as the amount of speculative building has declined. Prices of
new homes remain about constant, reflecting the ready availability
and relatively stable price of building materials. Savings and loan
institutions report that mortgage demand and commitments are
generally down, with Colorado and New Mexico notable exceptions.
Expectations for future mortgage dead vary widely. Mortgage rates
remain constant to slightly lower, with a slight decline or no
change expected in the months ahead. The inflow of new savings is as
good as, or slightly better than, a year ago. Lover minimum deposit
requirements on MMDA's and Super NOW's have proved effective in
attracting funds for institutions aggressively seeking them.
Agriculture
The condition of the winter wheat crop is reported mostly good in
Kansas, Missouri, Nebraska, and Wyoming, although suffering somewhat
from lack of moisture. In Oklahoma and eastern Colorado, the
condition of the winter wheat crop is described as excellent, with
potentially the best crop in years in prospect. Participation by
farmers in government acreage set-aside programs for wheat, corn,
and sorghum varies widely among Tenth District states. Little
participation is reported in Wyoming, New Mexico, and parts of
Colorado, partly because producers are anticipating strong grain
prices locally. But agricultural lenders in Kansas, Missouri, and
Nebraska report that individual farmers are signing up 75 to 100
percent of wheat acres, and 60 to 85 percent of corn acres, for set-
aside.
Spring calving results are reported as good to excellent in Missouri, Nebraska, Colorado, and Wyoming, but only average in Kansas and Oklahoma. In Nebraska and parts of Wyoming, stocker cattle have mowed into feedlots. However, in other Tenth District states stocker cattle are still being held in anticipation of higher prices.
Rates of farm liquidation vary among Tenth District states, but are generally lower than recent publicity night indicate. Liquidations of farm businesses are three to five tines as high as bankers consider normal, however, with partial liquidations five to six times as high. District agricultural lenders expect these liquidation rates to remain high for at least several months. Despite current farm financial difficulties, few farm borrowers did not receive credit for spring planting. Banks in New Mexico and Wyoming report less than 2 percent of their borrowers did not receive credit. Percentages are somewhat higher in other district states, ranging from 3 percent in Kansas and parts of Nebraska to 12 percent in Missouri.
Banking
Loan demand at Tenth District banks is mixed, with about equal
numbers of banks reporting slightly increased, unchanged, and
slightly decreased loan demand. Consumer and residential real estate
loans are tending to rise, while agricultural loans are tending to
decline. Deposits are rising slightly, although they, too, display
mixed behavior. Super NOW accounts, MMDA's, IRA and Keogh accounts,
and small time deposits are rising more rapidly than large CD's and
passbook savings accounts; demand deposits and conventional NOW
accounts are declining. None of the respondents changed their prime
rate in the last month, but about half expect the prime to decrease
slightly in the near future. Over three-quarters of the respondents
have not changed consumer lending rates in the last month and do not
expect changes in the near term. Most of the surveyed banks have
reduced the minimum deposit on MMDA's and Super NOW's to $1,000,
generally with no effect on deposits.