Beige Book Report: Kansas City
November 1, 1989
The Tenth District economy appears to be growing moderately. Retail sales have been steady over the past three months. Retail prices and prices of manufacturers' inputs have changed little in recent months. Most retailers are satisfied with their inventory levels, but manufacturers continue to trim their materials inventories. Drilling activity continues to increase. Housing activity is soft. Loan demand at commercial banks has increased slightly. Fall crop yields are average to slightly above average, and agricultural credit conditions remain stable.
Retail Sales
District retailers report sales increases over last year and steady
sales over the past three months. Demand is strong for fall
merchandise and women's apparel, but sales of housewares and
furniture are somewhat weak. Respondents expect normal seasonal
increases in sales as Christmas approaches. Retailers typically have
no plans for special sales other than the usual holiday promotions.
Prices have changed little over the past three months and are
expected to remain generally stable in coming months. Most retailers
are satisfied with their inventory levels. New car sales have picked
up in some district states. Sales outlooks are mixed, but dealers
generally expect little change from last year's sales levels.
Manufacturing
Most respondents report little change in input prices from a year
ago or from three months ago. Few price changes are expected over
the next three months. Materials inputs are readily available, and
some lead times have shortened. Most firms continue trimming
inventories, and plan to maintain lower levels in upcoming months.
Although most plants are operating near full capacity, reports of
bottlenecks or labor shortages are rare.
Energy
Recent gains have propelled district drilling activity above year-
ago levels. More stable oil prices and increased exploration for
natural gas have been credited for much of the improvement in the
district's energy industry. The average number of active drilling
rigs in the district increased from 259 in August to 289 in
September, the third consecutive month of increase. Thus,
exploration and development activity stands about 11 percent above
the level of one year ago.
Housing Activity and Finance
Most area homebuilders contacted report housing starts at or below
the levels of last month and last year. New home sales are stable to
down slightly, while new home prices are stable to up slightly. Most
homebuilders report rising materials prices. A wholesale distributor
of lumber reports sales below those of a year earlier and well below
the level of three months ago. Most respondents expect housing
activity to remain steady or to decline slightly.
Most savings and loan respondents experienced net inflows of deposits over the past month. Mortgage demand has softened. While mortgage rates have recently been relatively steady, most respondents expect a slight decline through the remainder of the year.
Banking
District bankers report a slight increase in total loan demand
during the past month. All loan categories except residential
construction and commercial real estate contributed to the increase;
those two types of loans did not change. The level of investments
also rose. Two-thirds of the respondents reported that loan to
deposit ratios were higher than a year ago but constant over the
past month. All but one respondent reported no change in the prime
rate last month. About half of the respondents expect the prime rate
to fall in the near term, with the other half expecting no change.
Most respondents did not change consumer lending rates last month
and do not expect a change in the near term.
Agriculture
The harvest of row crops and seeding of winter wheat are nearing
completion in the Tenth District. Dry weather has allowed the
harvest to progress rapidly. Dryland corn and soybean yields are
expected to be about average in most parts of the district, but
irrigated crop yields are expected to be above-average in some
states. In Kansas, however, an early frost has reduced the yield and
quality of the late milo crop. The cotton harvest will begin soon in
southwest Oklahoma, and good yields are expected. Warm weather and
sufficient early rainfall have promoted the development of excellent
winter wheat stands. Topsoil moisture levels have declined recently,
however, and more rain is needed to ensure further development of
the crop and to provide adequate winter wheat pasture for cattle.
District cattle ranchers continue to benefit from strong feeder cattle prices. Despite strong cattle prices, however, expansion of district cattle herds was restricted by drought-reduced feed supplies earlier in the year. A limited supply of young cattle available for herd expansion and placement in feedlots has maintained the high cost of feeder cattle and, in turn, has limited profits for district cattle feeders.
Agricultural credit conditions in the district remain stable. Strong wheat and feeder cattle prices continue to support farm incomes across most of the district. Crop insurance benefits, federal drought relief payments, and financial reserves built up in recent years will help farmers in some parts of the district to withstand the 1989 drought.