Beige Book Report: St Louis
June 24, 1986
Summary
Despite stronger employment growth, other sectors expanded more
slowly in the District than in the nation. This is a reversal of the
stronger District growth indicated in the last report. A survey of
small District businesses, however, indicated a generally optimistic
outlook for the second and third quarters of the year. Bank data
show commercial lending expanding more rapidly and consumer lending
growing more slowly than in the same period last year. District
farmers are enjoying nearly ideal early growing conditions. Farm
lending by commercial banks has declined sharply while the
deterioration of farm loan portfolios has slowed.
Outlook
A recent survey of 236 small businesses in the District found a
generally favorable outlook on business conditions through
September. They judged the second quarter of this year to be a more
favorable time to expand operations than they had previously judged
the first quarter. The more favorable outlook was due primarily to
declining interest rates. Pricing plans appear more restrained as 17
percent of the respondents anticipated price increases in the second
quarter versus 25 percent who planned to increase prices in the
previous survey last quarter.
Employment
Although growth in District nonagricultural employment showed some
signs of slowing in April, the District's 3.6 percent growth rate
exceeded the nation's 2.5 percent rate over the three-month period
ending in April. The District growth was spurred by a particularly
strong expansion of Missouri's non-manufacturing industries.
Employment in the District's manufacturing sector expanded at a 0.8
percent rate in the February through April period. The District
unemployment rate declined from 7.9 in March to 7.6 percent in
April.
Construction
Both residential and nonresidential construction activity grew more
slowly in the District than in the nation in recent months. District
residential building contracts expanded by 1.5 percent during the
February-April period, and were 2.3 percent above the year-ago level
while the corresponding national figures were 9.1 and 11.1 percent.
The pace of residential construction in Missouri was similar to the
nation's, but was substantially weaker in Arkansas and Tennessee.
Nonresidential building contracts declined by 2.4 percent in the three months through April in the District, but increased by 2.2 percent nationally. Strong growth in Tennessee was offset by declines in Arkansas, Kentucky and Missouri. District nonresidential building contracts were 6.7 percent below year-ago levels compared with a 4.5 percent national decline.
Consumer Spending
Despite strong growth in Missouri, first quarter retail sales
decreased at a 0.5 percent rate in the District compared with a 4.3
percent national rate of increase. First quarter consumer spending
in the District was 5.4 percent above the year-ago level, however.
Banking
Total loans outstanding at large weekly-reporting District banks
grew at a 7.0 percent annual rate for the three months ending May.
This rate of growth is approximately half that for the same period
last year due primarily to sluggish growth in both consumer and real
estate lending. In particular, consumer loans grew at a 7.4 percent
rate over the three months compared with a 30.2 percent rate for the
same period last year. Commercial loans, on the other hand, expanded
at a 16.8 percent rate against a 10.3 percent rate over the same
three months last year.
Agriculture
As a result of favorable planting weather followed by timely rains,
most District crops have developed at a pace ahead of last year's.
Normal weather patterns for the remainder of the crop season would
produce near-record harvests of corn, soybeans and other major crops
in spite of acreage cutbacks related to the price support programs.
At the end of the first quarter, District banks had reduced their agricultural loan volumes by 9.2 percent from a year earlier. The sharpest reductions were made by banks in Missouri where volumes fell by 18.3 percent. Kentucky banks, however, posted a slight increase in agricultural loans. Overdue farm loans at District agricultural banks continued to grow as a percentage of all agricultural loans but did so at a slower pace than last year. While net chargeoffs at agricultural banks in the U.S. continued to increase, chargeoffs were unchanged for District agricultural banks.