Beige Book Report: Kansas City
December 5, 1985
Overview
Economic activity in the Tenth District appears to be generally
sluggish, with little improvement anticipated in the near future.
Retailers report flat sales and stable prices, conditions that are
expected to continue into next year. Automobile dealers are
pessimistic for sales through yearend and into 1986. Inventories of
retail good and materials inputs are both considered satisfactory.
Homebuilders are cautiously optimistic for 1986, though current
conditions are mixed. Savings and loan institutions also expect
mortgage demand and mortgage commitments to improve slightly in
1986. Tenth District banks report relatively constant loan demands,
deposits and loan rates over the last month. Fall crop yields are
well above normal. Further, but slower, declines in farm land values
are expected.
Retail trade
Retailers report flat sales in the last three months, and no
significant change in sales this year over last year. Women's wear
and home furnishings sales have been strong while sporting goods and
housewares sales have been weak. Retailers have been expanding
inventories in anticipation of sales increases during the coming
holidays. Most report that they are planning on having special sales
and promotions for Christmas this year. For 1986 retailers expect
sales to remain fairly constant and inventory levels to fluctuate
only seasonally. Prices are stable and are expected to remain so the
rest of this year and through next year.
Automobile Sales
Automobile dealers report sales have declined recently, due largely
to the elimination of financing incentives. Sales currently are
about the same to down slightly compared with a year ago. Most
dealers expect sales to be flat to down slightly through yearend and
down in 1986. Sluggish sales and large shipments of 1986 models have
resulted in expanding inventories.
Purchasing agents
Most purchasing agents report that input prices have remained nearly
unchanged over the past three months as well as from a year earlier.
They generally expect input prices to remain constant for the rest
of the year and foresee no major price increases in 1986. Very few
difficulties in obtaining materials are reported and few problems
are expected to arise. All firms report that materials inventories
are satisfactory and no major changes are expected for the rest of
the year or in 1986.
Housing activity and finance
Homebuilders give mixed reports about current housing conditions,
but are cautiously optimistic for 1986. Housing starts range from
slightly up to significantly down for both single-family and multi-family structures, relative to a year ago. But most area builders
expect starts in 1986 to be as good as or better than 1985. Sales of
new homes, prices of new homes, and the inventory of unsold homes
vary widely across reporting areas. Prices of materials are
generally steady and materials availability is good, with no changes
expected.
Savings and loan institutions also give mixed reports about current and future mortgage behavior. Respondents report a moderate increase in savings inflows relative to last year, along with slightly lower to constant mortgage demand and commitments. Generally, stable inflows are expected for 1986, along with slightly higher to constant mortgage demand and commitments. Most savings and loans report declining mortgage rates recently, but expectations for 1986 rates are mixed.
Banking
Total loan demand, total deposits, and loan rates have been
relatively constant at Tenth District banks over the last month.
Most bankers report unchanged demand for commercial and industrial
loans. Half of the respondents experienced a stronger demand for
consumer credit, while the other half report no change. Several
bankers note that their automobile loans have not been competitive
lately, but credit card lending has increased. Agricultural lending
was flat to slightly down, and bankers continue to express concern
about the quality of agricultural credit. The prime rate is constant
at Tenth District banks. Most respondents also report no change in
consumer loan rates. Total deposits have been stable. Half of the
respondents had lower levels of demand deposits, but modest
increases were registered for NOW accounts, Super NOW accounts, and
MMDA's. IRA and Keogh contributions were steady to slightly higher.
Most banks had no change in passbook savings accounts, although a
few report decreases. Large certificates of deposit and small time
deposits generally were unchanged.
Agriculture
Fall crop yields are above normal and paydowns on livestock loans
are improving, but liquidations and foreclosures continue with
farmland values still falling. Fall harvest in the Tenth District is
generally on schedule, although wet weather has delayed fieldwork in
some states. Corn, soybean, and sorghum yields are reported well
above normal in several district states. In Oklahoma, normal cotton
yields are expected. Paydowns on livestock loans in Nebraska,
Kansas, Wyoming, and New Mexico are much better than a year ago.
Much of this improvement is attributed to the recent rebound in
cattle prices. Farm liquidations and foreclosures have saturated the
farm real estate market, and very little land is changing hands.
Some financial institutions that have acquired farmland through
foreclosure or liquidation are not selling at current low prices.
Lenders expect further declines in farm real estate values in the
coming months, but the rate of decline may not be as sharp as it was
a year ago. Agricultural lenders in most district states are
encouraging their farm borrowers to apply for Farmers' Home
Administration (FmHA) guarantees. Lenders in Colorado and Wyoming,
however, report that they no longer send borrowers to the FmHA, as
many sent in the past have failed to qualify.