Beige Book Report: St Louis
December 5, 1990
Summary
The level of Eighth District economic activity has declined in
recent weeks. Retail sales, in real terms, are down. The
manufacturing and construction sectors continue to weaken, although
manufactured exports are increasing. Minor credit tightening has
occurred at the District's largest banks. The agricultural sector
shows continued strength.
Consumer Spending
Most retailers report that the nominal value of sales is near, or
slightly below that of a year ago. Thus, real retail sales have
declined. Sales of appliances, furniture and other big-ticket items
are particularly weak. Relatively mild weather has slowed the sales
of winter apparel, while uncertainty about national economic
conditions and the Persian Gulf situation have made consumers both
cautious and price-conscious. Retail inventories generally are at
planned levels. Most contacts expect the nominal value of holiday
sales to be near or slightly below that of 1989, though several
respondents, including those representing discount stores in St.
Louis and Memphis, expect substantial growth. Contacts report
weakening vehicle sales, especially for cars that are domestically
produced or are not fuel-efficient. Small trucks are reportedly
selling fairly well. Vehicle inventories are generally at desired
levels. The outlook is for continued weakness.
Manufacturing activity continues to weaken, with both durables and nondurables sectors affected. Several auto assembly plants had temporary layoffs in November and some of their suppliers, such as producers of tires and accessories, also report production cutbacks. While most textile and apparel producers in the District are experiencing flat or declining orders, three factories filling Operation Desert Shield-related orders for uniforms, hats and boots and one plant producing medical uniforms are substantially expanding their operations.
Construction and Real Estate
Both residential and nonresidential construction continue to weaken.
Permits for single-family homes in St. Louis are down by one-third
from their year-ago level, while multifamily permits are down almost
75 percent. Existing home sales have also weakened in St. Louis,
Little Rock and Memphis. Realtors in these cities report that
economic conditions and the Persian Gulf are the primary negative
factors affecting the housing market. One Louisville realtor,
however, reports that home sales are up substantially from their
year-ago pace; this realtor expects a record dollar volume in 1990.
Banking and Credit
Loan officers report that some minor credit tightening has occurred
recently at the District's five largest banks. For commercial and
industrial (C&I) loans that banks were willing to approve, the costs
of credit lines and the spreads of loan rates over base rates had
increased somewhat, according to respondents, while the maximum size
of credit lines and collateralization requirements were basically
unchanged. Except for residential mortgage loans, real estate loan
terms have tightened during the past three months. Credit standards
for construction and land development loans and loans to finance
commercial office buildings have tightened somewhat more than those
for nonfarm nonresidential real estate loans. Respondents indicated
that, apart from normal seasonal changes, demand for residential
mortgages had remained the same or weakened somewhat compared with
the first half of the year. The banks' willingness to make consumer
loans, however, had not changed.
Agriculture and Natural Resources
The harvest of the Districts crops is nearing completion. When the
harvest is over, District production of soybeans will be up
slightly, while cotton and tobacco production will be up
substantially over 1989. Corn production will be down. Dry soil
conditions led to poor pasture conditions and a short supply of hay
in parts of Mississippi. Returns to cow/calf operators remain
relatively strong. Southern pine lumber mill activity is running
ahead of last year. District states' recent coal production has been
higher than a year ago.
Exports
District exports of manufactured goods have increased in recent
months, while agricultural export growth appears mixed. Much of the
export growth of manufactured goods is among producers of auto
parts, chemicals, industrial machinery and printing and packaging
machinery. Exports to Mexico are growing as import restrictions have
eased. Government offices assisting exporting firms report a recent
upswing in the demand for their services. Exports of rice are up
slightly from a year ago, due in part to large sales to Mexico and
Brazil, whose rice crops were damaged by severe droughts. Several
contacts believed the lower exchange value of the dollar has helped
boost exports in recent months, but were unsure how important this
factor was. Corn, wheat and soybean exports are reported as lower
than a year ago.