Beige Book Report: St Louis
January 27, 1988
Summary
The District's economy continues to expand at a moderate pace.
Employment growth, one of the broadest indicators, has been
particularly strong in the District. Holiday sales growth, while
less than in recent years, was stronger than any analysts and
retailers had anticipated in light of the stock market crash.
Construction activity was mixed with expanding residential
construction and declining nonresidential building. Rank lending
slowed in the fourth quarter due to weakness in consumer borrowing.
Consumer Spending
District retailers report that holiday sales were 2 percent to 6
percent above year-ago levels, representing little or no gain after
inflation. Sales were stronger in Louisville, where several contacts
reported double-digit gains. Retailers initially feared that the
stock market crash would lead to sharp declines in consumer buying.
Apparel sales, particularly women's wear, were soft. Nonetheless,
retailers indicated that, while consumers were cautious, they did
spend.
Respondents reported that numerous holiday promotions were used this year to counter the possibility of sharp spending declines. In addition, many indicated that sales had slowed before the October 10 market crash, prompting retailers to stock their stores conservatively. As a result, most contacts had inventories at or below desired levels. Sales since Christmas have been slow, due, in part, to harsh weather in some areas. Retailers expect first quarter sales to be only slightly above levels of a year earlier. One respondent concluded that holiday sales promotions have borrowed from first quarter sales.
Employment
District unemployment rates tended to decline throughout 1987. An
exception is Missouri, where the jobless rate increased slightly.
District nonfarm employment growth outpaced the nation in the three
months ending November, expanding at a 4.1 percent annual rate
compared with 3.2 percent nationally. Regional growth was
concentrated in the services, construction and manufacturing
sectors. District manufacturing employment grew at a 4.5 percent
rate in the September-November period with strong gains in the
fabricated metals and textile/apparel industries. Some textile and
apparel producers in Western Tennessee are having difficulty finding
workers for their rapidly expanding operations. The transportation
equipment sector was the only major manufacturing industry to suffer
employment declines. District auto makers, concentrated in Missouri,
continue to lay off a workers to trim excessive inventories; further
layoffs and plant closings are planned for the first quarter.
Construction
In recent months, residential construction has grown more rapidly in
the District than in the nation. The value of contracts for
residential building expanded 3.2 percent in the three months ending
in November, while dropping 3.2 percent nationally. Single-family
homes continue to account for most of the growth. The value of
nonresidential contracts declined by 11.8 percent in the three
months through November, primarily due to a sharp drop in Missouri.
Banking
Total loans at weekly-reporting District banks grew at an 8.7
percent rate in the fourth quarter compared to 13.4 percent for the
same period in 1986. Commercial and real estate lending grew at
rates similar to those recorded last year. Consumer loans, however,
slowed considerably, declining at a 3.7 percent rate compared to a
25.4 percent increase for the fourth quarter of 1986.
Fourth-quarter deposits at these banks grew at an 11.1 percent rate versus 18 percent for the same 1986 period. Large time deposits increased at a 36.5 percent annual rate over third-quarter levels compared to a 0.6 percent rate of decline for the same period last year. Time deposits totaled $4.9 billion or 21 percent of total deposits at the twelve weekly-reporting District banks. Last year, total time deposits were only 17 percent of all deposits. The surge in large time deposit growth may be related to investors getting out of the stock market after the October crash. Demand deposit growth in the fourth quarter slowed to a rate of 11.3 percent compared to 41 percent for the same period last year. NOW account growth also slowed luring the quarter while MMDAs declined at a 15.3 percent rate.