Beige Book Report: St Louis
December 5, 1985
Summary
Little change in business conditions is expected through next April.
In the third quarter, District nonfarm employment grew faster than
in the nation despite a regional decline in manufacturing
employment. Residential construction activity increased in the third
quarter, while nonresidential construction declined. After heavy
consumer spending in August and September, District retail sales
declined in October. District lending activity in August through
October was characterized by strong consumer and sluggish commercial
lending. Record yields for most District crops were recorded,
despite heavy November rains that delayed the completion of the
harvest in some areas.
Outlook
Slightly more than half of the 240 District small businesses
surveyed in October expect business conditions to be about the same
through April 1986. Although 42.5 percent expected an increase in
real volume through next January, only 17 percent thought the period
was a good time to expand and most planned no change in employment
levels, average compensation, or prices.
Business Activity
Business activity in District states, as measured by an index of
seven indicators, exhibited widespread weakness in recent months,
After only moderate gains in all four states in July and August, the
indices declined in September in Arkansas, Kentucky, and Tennessee
and rose only slightly in Missouri.
Employment
Eighth District nonfarm employment grew in the third quarter by 2.9
percent (annual rate) exceeding the national rate of 2.5 percent.
Third quarter strength in the District nonmanufacturing sector
offset a 2.3 percent decline in manufacturing employment. The
District unemployment rate remained unchanged in September from the
August rate of 8.3 percent.
Construction
District residential building contracts increased 2.0 percent
(simple rate) in the third quarter but were only 0.2 percent higher
than in the same period last year. Although nonresidential
construction declined 2.8 percent in the third quarter, the level
was 20.3 percent higher than year-ago levels.
Consumer Spending
Despite an August increase, District retail sales declined 1.1
percent last summer (June-August) from the previous three-month
period. Recent reports suggest the August expansion continued into
September, resulting in a strong third quarter. Vigorous auto sales
in response to low financing rates on domestic models and greater
availability of imported cars contributed to the expansion. Reports
from Mississippi, Tennessee, and Arkansas indicate retail sales,
particularly car sales, declined sharply in October from September
levels.
Banking and Finance
For the three-month period ending October, total loans at large
District banks grew at a 6.6 annual rate. This activity represented
a slower rate of growth than that recorded for the same period in
1984 and was characterized by sluggish commercial lending and strong
consumer loan volume. Commercial loans declined at a 9.0 percent
rate compared with a 5.0 percent increase last year. Consistent with
recent experience, consumer lending has grown more rapidly over the
past three months (26.9 percent) than for the same period last year
(11.2 percent). Real estate lending slackened, growing at a 4.5
percent rate during the three months ending October compared with a
13.0 percent rate over the same period last year. Total deposits
grew slightly over the three most recent months, with increased
activity in MMDA and NOW accounts.
Agriculture
Harvests of most District crops have been completed with record-
breaking yields in many instances. Heavy rains in November, however,
have slowed the corn harvest in northern sections of the District.
Soybean harvests also have been delayed in southern sections of the
District where soybeans are harvested later due to double cropping.
Efforts to unify and consolidate lending operations at the farm
credit banks of Louisville and St. Louis are making some progress.
Stockholders of 32 out of 35 production credit associations (PCA's)
in the St. Louis farm credit district have approved a proposal to
merge their associations into a single PCA for the purpose of more
effective pooling of resources. A similar proposal is pending for
federal land bank associations. The Louisville District will offer a
similar plan to stockholders in the coming month.