October 23, 1985
Summary
District indicators suggest a slowing of economic activity the third
quarter of this year. As in past reports, employment growth
continues to lag national trends. Evidence of strength in the retail
sectors of the District is supported by consumer lending activity,
which has maintained a pace well above that of last year.
Construction activity, while strong in certain areas, has been
relatively flat for the District as a whole. The agricultural
outlook finds record-breaking harvests accompanying historically
low commodity prices.
Business Activity
Business activity, as measured by an index of seven indicators,
declined in Arkansas at a 3.4 annual rate in August, after a slight
increase the previous month. Missouri business activity also
declined, decreasing at a 2.8 percent rate in August after a 5.9
percent increase in July.
Payroll Employment
Payroll employment continues to expand more slowly in the District
than in the nation. For the twelve months ending in August 1985, the
District growth rate was 2.5 percent compared to a 3.3 percent
national rate. A 1.9 percent decline in manufacturing employment
contributed to the slower District rate. Over the same period,
manufacturing employment increased at a 5.1 percent rate nationally.
The seasonally adjusted unemployment rate increased in the District to 8.2 percent in August from 8.0 percent in July. August jobless rates ranged from 6.5 percent in Missouri to 9.4 percent in Kentucky.
Consumer Spending
District retail sales were 6.4 percent higher in July than year-ago
levels. Sales were particularly strong in Tennessee, increasing by
12.5 percent over the period. Missouri car sales were strong in the
July through September period. Tax revenues from motor vehicle sales
rose 17.5 percent for the quarter over the same period last year. A
leading Missouri car dealer expected sales of both domestic and
imported cars to remain vigorous through the end of the year,
spurred by lower interest rates. A representative of a Memphis area
trucking firm indicated that sluggish replacement of inventories can
be interpreted as a signal of a slow Christmas retail season.
Construction
Construction contracts decreased in the District over the twelve
months ending in August. Residential contracts decreased 5.0 percent
from year-ago levels. Analysts have attributed the decline in
residential contracts to the satisfaction of much of the pent-up
demand for housing after higher mortgage rates in past years. Non-
residential contracts in the District declined slightly. August
figures were 0.4 percent lower than year-ago levels.
Banking and Finance
Total loans at large weekly-reporting District banks, although
growing at a 5.5 percent annual rate during the third quarter,
increased at a considerably slower rate than that recorded over the
same period in 1984. Consumer lending continues strong with third
quarter activity increasing at a 25 percent rate. Consistent with
earlier periods, commercial lending remains sluggish. For the three
months ending September, commercial lending fell 11 percent over
second quarter levels. Real estate lending, although strong during
July and August, slackened during the final month of the quarter.
Real estate loans grew at an 8.1 percent pace as compared to an 18.8
percent rate over the same period last year.
Agriculture
Reports from the District have consistently supported the national
trend of high yields, record harvests, and prices far below
historical norms. The rice harvest is nearly complete, and early
indications show that some new varieties have produced yields 50
percent larger than conventional varieties. One rice exporter,
however, indicated that due to the price floor provided by the CCC
loan rate, U.S. rice is overpriced by $200 per ton relative to rice
produced in Thailand.
Other information confirms continuing stress among farmers. Recent reports, however, indicate a large number of financially strong farmers expect to be acquiring the assets of failed farmers when the prices of those assets fall to levels consistent with the returns they generate.