Beige Book Report: St Louis
August 2, 1988
Summary
The District's economic growth has been sluggish. District
employment has leveled off in recent months, growing more slowly in
all sectors than in the nation. Both consumer spending and
construction activity have also been weak. Meanwhile, it appears
that the drought will reduce District corn yields by as much as 50
percent, but recent rains will help the soybean crop.
Employment
Following rapid growth earlier in the year, District nonagricultural
employment rose at only a 0.4 percent annual rate in the three
months through May, while rising at a 3.6 percent rate nationally.
District employment growth trailed the national average in all
sectors. Employment in District services and trades sectors—major
sources of earlier growth—expanded at only a 1.2 percent rate in
the March-May period, while in goods-producing sectors, including
mining, construction, and manufacturing, it declined at a 2.5
percent rate. Nonelectrical machinery was the only manufacturing
sector in which employment grew substantially.
Consumer Spending
District department store sales have been weak in recent months.
Retailers in Memphis and St. Louis report second-quarter sales
slightly below year-ago levels, while Louisville and Little Rock
sales were flat to 5 percent higher. Sales of shoes and women's
apparel were particularly weak. Inventories, however, are only
slightly higher than desired because of heavy discounting to
liquidate summer goods. The outlook is one of cautious optimism:
retailers generally feel that sales in August and September will be
2 to 6 percent higher than a year earlier. In line with these
restrained expectations, inventory growth of fall goods should be
more limited than in recent years.
Construction
District construction activity declined in recent months and was
considerably weaker than the national average. Much of the decline
was concentrated in Arkansas and Kentucky. The value of District
residential building contracts awarded in the three months through
May fell 6.9 percent from the previous three-month period and was
8.9 percent lower than a year earlier. Nonresidential building
contracts fell by 12.7 percent in the March-May period and were down
18.6 percent from a year earlier.
Banking
Total loans at weekly reporting District banks increased at a 7.7
percent annual rate in the second quarter, somewhat slower than in
the same period last year. Commercial lending, which has picked up
in recent months, expanded at a 9.3 percent annual rate in the
second quarter, slightly higher than in the same period last year.
Much of the acceleration in commercial loan growth, however, can be
attributed to purchases of loan participations by large District
banks.
Agriculture
Widespread rains arrived too late to prevent significant damage to
the District's corn crop. Corn yields are expected to be down 50
percent or more in Missouri, southern Illinois and central
Tennessee. Western Tennessee received timely rains in early July;
still, corn yield losses of 25 percent are anticipated.
Farmers' have turned their attention now to the soybean crop which accounts for over 30 percent of District crop receipts. Some damage to soybean yields has already occurred but the crucial period of growth—from late July to mid-August—is yet to come. With enough rain during this period, further damage to soybeans can be minimized and a near-normal crop harvested. The drought caused some soybeans to be planted such later than normal, however, increasing the risk that an early frost could damage the crop. Cotton and rice in Arkansas have suffered only minor drought damage, with over 90 percent of these crops in fair-to-good condition.
The Mississippi River remains open to barge traffic, but travel times from St. Louis to the Gulf of Mexico have doubled. So far, the river network has been able to meet export commitments because grain shipping is normally slow at this time of the year.