Beige Book Report: St Louis
December 1, 1986
Summary
The District's expansion of employment and construction exceeded the
nation's in recent months, while the pace of retail sales trailed
the national trend. Strong real estate and consumer lending
characterize the local banking market. Harvests are nearly complete
except in Missouri where heavy rains have delayed the fall harvest.
Employment
District nonfarm employment increased at a 4.6 percent rate in the
third quarter compared with 1.7 percent for the nation. Nonfarm
employment growth in the region was led by the construction sector,
with third quarter employment 15.8 percent above last year's third
quarter level. Despite a 1.4 percent rate of decline in
manufacturing jobs, the food processing sector continues to expand.
Employment in the District electrical equipment sector picked up in
the third quarter after declines in the first half. The weaker
dollar reportedly has led to increased foreign demand for the
region's wood pulp and paperboard products. Depressed coal prices
have contributed to the contraction of mining activity in Western
Kentucky this year. A strike by workers in an auto electronics plant
in Indiana caused the layoff of 5,000 auto workers in St. Louis and
900 workers in Bowling Green, Kentucky beginning November 18.
Construction
Third quarter construction activity expanded faster in the District
than in the nation. The value of residential construction contracts
awarded in the District grew at a 10.9 percent rate compared with a
5.0 percent rate of decline nationally. Third quarter residential
contracts in the District were 14.0 percent above the level of the
same period in 1985, exceeding the nation's 5.7 percent growth. In
contrast to District trends, Louisville reported a sharp increase in
multi-family building in comparison with last year. The value of
nonresidential construction contracts expanded at a 15.4 percent
race in the third quarter, compared with the nation's 0.5 percent
pace.
Consumer Spending
District retail sales grew at a 2.2 percent rate in the three months
through August, with sharp losses in Missouri dampening regional
growth. In comparison, national sales grew at a 6.8 percent pace
during the period. Contacts reported vigorous spending on new cars
in September, but few sales in October.
Banking
For the three months ending October, total loans at large District
banks grew at a 12.8 percent annual rate, more than twice the 6.2
percent rate for the same period last year. Real estate loan growth
was the dominant factor, expanding at a 24.1 percent rate compared
with 4.0 percent for the same August-October period in 1985.
Commercial lending, which had declined during the third quarter,
picked up slightly in October. Consumer lending continues strong,
expanding at a 19.9 percent annual rate, a rate comparable with the
same period last year.
A recent survey of District bankers indicates a continued willingness to make consumer installment loans as they have not experienced rising delinquencies. Bankers are actively promoting home equity lines of credit in response to the phasing-out of the tax deductibility of consumer interest costs. One large bank has eliminated all points and closing costs for home equity loans until January 31, 1987.
During the last five weeks, numerous banks and savings and loans have lowered their passbook rate to a range of 4.8 to 5.0 percent. One large bank, however, in an attempt to gain market share, increased its rate to 6.0 percent for accounts maintaining a minimum balance of $200.00.
Agriculture
Contacts suggest that despite low crop prices, high government
payments have allowed many local farmers to improve their financial
positions. They indicate that the failure rate of farmers is
unchanged or slightly lower than last year because the most
financially stressed farmers have already left farming. The slide in
land prices is expected to slow or stop but no significant
appreciation is anticipated.
Harvests are nearly complete or are ahead of schedule in all District states except Missouri where heavy October rains delayed corn and soybean harvests. Flooding destroyed approximately 4 percent of Missouri's soybean crop. Despite the adverse weather, Missouri farmers enjoyed a record corn yield and a strong soybean yield.