Beige Book Report: St Louis
October 27, 1987
Summary
District economic activity has been uneven and generally weak.
Despite a recent upturn in manufacturing, District employment has
stagnated in recent months. Construction activity has declined as
nonresidential building decreased. District lending activity slowed
during the third quarter as consumer and commercial loan growth
slackened. Agricultural conditions have been generally favorable for
both crop and livestock producers.
Employment
The District unemployment rate dropped to 7.2 percent in August from
7.4 percent in July. The August jobless rate was below 7.0 percent
in Missouri and Tennessee, but above 8.0 in Arkansas and Kentucky.
District payroll employment was virtually unchanged between March
and August, after growing at a 3.4 percent annual pace since the end
of 1982. Employment in mining, construction, manufacturing and
services has declined since the first quarter while growth in the
remainder of the economy has been sluggish. Growth of services has
been inhibited by a slowdown in health services.
Despite the decline since the first quarter, District manufacturing employment has picked up in the most recent months, growing at a 2.4 percent rate in the three months through August. The recent growth was due to the continued expansion of food processing and turnarounds in the electrical equipment and textile/apparel industries.
The number of transportation equipment jobs also increased as auto assembly workers returned from layoffs. Planned layoffs of auto workers in the St. Louis area in mid-October were postponed due to increased car sales. Regional production of shoes, concentrated in Missouri, has been growing steadily in recent months. The increase was attributed by some local analysts to the declining exchange value of the dollar.
Construction
Although District residential construction has advanced slightly
compared with a year earlier, recent evidence is not encouraging.
The value of residential contracts fell 4.5 percent in the June-
August period. Contacts anticipate continued declines in residential
construction due to recent and expected future interest rate
increases. Multi-family housing construction has exhibited
particular weakness over the past year as well as over more recent
periods. Multi-family permits issued in the June-August period were
63.7 percent lower than a year earlier.
The pace of District nonresidential building has slowed recently due to weakness in Arkansas and Kentucky. District nonresidential contracts expanded by only 2.4 percent in the three months through August following a 20.9 percent gain in the previous three-month period.
Banking
Total loans outstanding at large weekly reporting District banks
grew at a 2.8 percent annual rate for the third quarter. For the
same period in 1986, total loans expanded at a 13.3 percent annual
rate. A slowing in consumer and commercial lending contributed to
the recent quarter's slow growth. Consumer loans grew at a 9.1
percent rate during the quarter compared to 18.7 percent for the
same period last year. Commercial lending in the District has also
slackened, declining at a 2.4 percent annual rate. In particular,
the St. Louis and Little Rock markets experienced notable declines
in commercial lending during the third quarter. Real estate lending,
however, picked up during the most recent period, rising at a 27.5
percent rate compared to a 19.3 percent rate for third quarter 1986.
Agriculture
The 1987 crop year has been generally favorable for District
farmers. Harvests are far ahead of average due to early planting and
ideal harvest conditions. Early harvested crops such as corn and
cotton have recorded near-record yields due to favorable early
summer conditions. Cotton prices have risen due to strong domestic
and international demand. Yields of later crops such as soybeans
have been reduced due to extremely dry conditions since mid-summer.
The condition of pastures has also deteriorated for lack of rain.
Livestock producers have enjoyed a profitable year due to low feed costs and favorable meat prices. Beef prices remain high and prices for feeder cattle are the highest since 1979. Pork prices also remain high but are expected to fall because increased production is anticipated.