Beige Book Report: St Louis
January 28, 1987
Summary
Despite an upturn by the manufacturing sector, the expansion of
District employment has been sluggish in recent months and has
trailed the national average. Construction, however, has grown more
rapidly in the District than in the nation, led primarily by the
residential sector. Preliminary reports suggest that District
holiday sales were up moderately from the previous year's level.
Fourth quarter lending activity at District banks was characterized
by continued strong growth in commercial and real estate loans.
Agricultural loan volumes and loan quality continue to decrease.
Employment
For the third consecutive month, the District's seasonally-adjusted
unemployment rate was 7.7 percent in November. District non-farm
employment grew at a 2.2 percent annual rate during the three months
ending November, trailing the nation's 3.0 percent rate. Employment
in Tennessee grew quickly during the period (4.8 percent rate) while
little change occurred in Kentucky or Missouri. The number of
construction jobs in the District expanded at a rapid 7.2 percent
rate for the three-month period. District manufacturing employment
grew at a 1.0 percent rate for the three months ending November, but
was still 0.5 percent below year-ago levels. Gains in the
textile/apparel and electrical equipment sectors contributed to the
recent turnaround. Employment in the District transportation sector
has trended downward since early 1986 with gains in aircraft
manufacturing offset by losses in motor vehicle production.
Construction
For the three months ending November, the value of District
residential construction contracts grew by 12.6 percent, exceeding
the nation's 1.9 percent growth. Residential contracts during the
period were 8.9 percent above the level of the same period last
year, slightly higher than the increase nationally.
District nonresidential construction contracts grew by 6.5 percent in the September-November period, nearly matching the nation's 6.3 percent expansion. Compared with year-ago levels, however, District contracts for the period were 11.2 percent higher in contrast to a 5.7 percent decline nationally. Missouri was responsible for much of the District's construction growth with the value of residential and nonresidential contracts issued in the three-month period up 27.3 and 34.1 percent, respectively, from year-ago levels.
Consumer Spending
District retail sales followed national trends in October by falling
sharply due to a drop in auto sales. Holiday sales generally met
retailers' expectations of a moderate 4-6 percent rise over year-ago
levels. Most retailers indicated that inventories were close to
desired levels. Reports indicate that holiday sales were soft in the
Little Rock area despite widespread unscheduled markdowns the week
before Christmas.
Banking
Total loans outstanding at large weekly-reporting District banks
grew at a 14.2 percent annual rate for the three months ending
December. Fourth quarter loan activity saw a continued acceleration
in commercial and real estate lending. Commercial loans expanded at
a 15.8 percent rate for the three months compared with a 3.4 percent
rate for the same period last year. The St. Louis and Memphis
markets have experienced strong growth in the commercial area as a
result of increased purchases of loan participations rather than as
a result of strong loan demand. Real estate loans grew at a 26.5
percent annual rate in the fourth quarter versus a 5.3 percent rate
for the same period in 1985. Consumer lending gained momentum during
the period, growing at a 26.3 percent annual rate, a rate comparable
to that of the same period last year.
Agriculture
The volume of agricultural loans at District banks has followed a
two-year downward trend. The volume of farm loans outstanding for
the third quarter was 9.6 percent lower than one year earlier and
13.4 percent lower than two years earlier. Nationally, farm loans
fell by 13.8 percent from year-ago levels. The largest decrease in
the District was in Missouri where farm loans fell by 15.5 percent
from the previous year. The lower levels of farm debt can be
attributed to lower costs of many petroleum-based inputs such as
fuel and fertilizer, lower land prices and increased scrutiny of
farm loans on the part of lenders. While banks' farm loan volumes
are falling, their share of farm loans is increasing because of the
Farm Credit System's higher interest rates.
The quality of farm loans, as measured by non-performing farm loans, has continued to deteriorate both in the nation and the District. Loan losses at District agricultural banks, however, have stabilized while they continue to increase at the national level.