Beige Book Report: St Louis
August 9, 1989
A gradual reduction in the growth rates of employment and consumer spending has continued in recent months and led to layoffs in several durables manufacturing industries. Nonresidential construction contracts rebounded in the second quarter, but residential contracts were flat. Although recent rains have helped to ease drought conditions in northern Missouri, excessive rainfall has caused production losses in other parts of the District.
Employment
Average District payroll employment in the three months through May
was virtually unchanged from the previous three-month average,
following moderate growth earlier in the year. Employment growth
slowed in services and wholesale/retail trades in recent months
while employment declined in construction and manufacturing.
Compared with a year earlier, May payroll employment was up 1.4
percent in the District while rising 3.1 percent in the nation.
There has been little evidence of excessive wage pressures. In
Arkansas, for instance, nominal hourly wages for manufacturing
workers were only 0.7 percent higher in May than a year earlier.
Manufacturing
District manufacturing employment in the March-May period fell at a
0.6 percent rate compared with the previous three months, with
employment declines in most industrial sectors. Sluggish sales of
light trucks prompted a one-week closure of a Louisville assembly
plant, the first such shutdown in six years. Weak sales of
refrigerators and computer peripherals led two Arkansas producers to
announce major layoffs. Rising worldwide inventories of coated
paper, used in magazines, caused a major layoff of Arkansas paper
mill workers. In a June survey of Missouri purchasing managers, 48
percent of respondents reported increases in new orders in the
second quarter, a response slightly below that of a year earlier.
Delivery lead times increased in the second quarter for 28 percent
of respondents compared with 38 percent in the first quarter and 68
percent a year earlier.
Construction
Although construction employment continued to fall, the value of
construction contracts rebounded in the second quarter, suggesting
future strengthening. The value of District nonresidential
construction contracts rose 25.2 percent in the second quarter,
after falling at a similar rate in the first quarter. District
residential contracts rose marginally in the second quarter (0.8
percent), returning to the level of a year earlier. Contacts suggest
that recent mortgage rate declines have not caused substantial
increases in homebuilding as consumers expect further rate declines.
Consumer Spending
Retail sales growth has weakened in recent months. Non-auto sales
since May were 2-5 percent higher than a year earlier compared with
4-7 percent gains earlier in the year. Women's apparel and
accessories are reported to be selling moderately well, but sales of
men and boy's goods, and in most cases, of home furnishings and
appliances, are weakening. While inventories are near desired levels
at most outlets, some retailers in Arkansas report unplanned
increases. Car sales generally have been slow, with inventories
remaining at high levels. Tennessee contacts report new car sales
are slow, while used car sales are moderate to strong.
Agriculture and Mining
Most District crops are in fair to good condition. Rains helped ease
drought conditions in northern Missouri, although subsoil moisture
and livestock water supplies remain deficient. Cotton, soybean, and
tobacco growth is being hampered by excessive rains in the
District's southern states. By limiting access to cutting sites, the
rains have also reduced the supply of logs to some District paper
mills. Compared with the same period last year, coal production fell
8.5 percent in the District and 3.4 percent in the nation in the
six-week period through July 15. Sympathy strikes, industry-wide
vacations and stockpile drawdowns affected the coal production
figures during this period.
Banking
Total loans at the District's weekly-reporting banks grew at an 11
percent annual rate for the second quarter, somewhat higher than the
7.7 percent rate reported for the same period in 1988. Most of the
overall growth can be traced to real estate loans (primarily
nonresidential), which increased at a 24.7 percent annual rate, more
than twice that for the same period in 1988. Consumer loans continue
to be weak, growing at a 1.6 percent rate. Total deposits at these
same institutions declined considerably during the second quarter,
falling at a 2.5 percent annual rate compared with a 3.0 percent
rate of increase for the same period last year. Weakness in business
demand deposits and unusually large tax payments by households are
cited as possible explanations for this overall decline.