Beige Book Report: St Louis
May 1, 1991
Summary
Economic activity in the District remains weak, especially in
durables manufacturing. Some signs of recovery, though far from
conclusive, are present in many sectors including residential real
estate, retail, tourism and natural resources. Loan growth at large
District banks is flat.
Consumer Spending
Some contacts report that retail sales of general merchandise--particularly heavily promoted or discounted goods--have picked up
slightly. Others note that while their sales declines have stopped
and consumer traffic has increased, there is no evidence of a sales
upturn. Sales tax revenue data indicate that sales in Missouri have
stabilized after declining for most of 1990. No noticeable increase
in new car sales was reported, although used car sales have improved
in several areas.
Manufacturing
Overall manufacturing conditions continue to weaken, although
activity in some industries and firms has stabilized at expanded.
Missouri purchasing managers report that vendor lead times and the
rate of new orders received have declined. Production in most major
durables manufacturing sectors is flat or declining. Several car and
truck assembly plants have continued to experience intermittent
layoffs, but production at plants making vans and sports/utility
vehicles has stabilized. The national auto sales decline has
contributed to a sharp reduction in Missouri in the mining and
smelting of lead used in auto batteries. An automaker plans to close
one assembly plant in May eliminating 1,700 jobs, but expects to add
a third shift of 1,000 workers in early 1992 in a second plant,
pending a pickup in demand. Some steelmakers, facing declining
orders and, in some cases, rising inventories have ordered layoffs.
One large appliance factory has cut production sharply while
another, having cut production sharply last year, has avoided
further cutbacks.
Nondurables manufacturing conditions also are mixed. Many producers of textile and apparel face weak market conditions, and a chemicals producer reports no increased demand from the homebuilding or auto sectors. On the other hand, poultry and other food processors are reportedly doing well. Demand for paper used by advertisers has softened, but orders of paper products for food packaging and foreign markets are rising; paper mills are being built and expanded in Kentucky and Arkansas.
Services and Tourism
While job growth is sluggish in most services industries, the number
of health services workers continues to increase moderately, with
gains reported in all major metropolitan areas. Hospital
construction has accelerated in Missouri. Because of the expansion
of its international operations, one overnight express shipping firm
has avoided any substantial declines in its operations. An airport
expansion in the Evansville, Indiana, area is expected to generate
many new service jobs.
Tourism activity is expected to be as strong as, or slightly stronger than, last year. Contacts believe that many cautious consumers will shun overseas travel and spend their money closer to home, boosting domestic tourism. Hotel occupancy rates in Arkansas are above year-earlier levels. Reports regarding tourism in Missouri, however, are mixed. While more inquiries regarding tourist activities have been received, a theme park reports that some corporations have been hesitant to commit to bookings, given weak economic conditions.
Construction, Real Estate and Finance Contacts in St. Louis and Little Rock report increased buyer interest in recent months, primarily because of the end of the Persian Gulf war and the decline in mortgage rates. Nonetheless, single-family housing starts are well below their year-earlier levels and construction employment remains weak, especially in St. Louis. The western Kentucky market, in contrast, is doing well in terms of starts, construction employment and sales. Some builders report difficulty obtaining financing from banks and thrifts for pre-sold as well as "spec" homes. Contacts report that the lower- end/first-time homebuyer segment of the market is the strongest, with the upper-end/move-up segment still fairly weak.
Total loans on the books of large District banks showed no change in March after a slight February decline. Real estate loans rose 1.8 percent after declining 4.7 percent in February. Commercial and consumer loans both were down slightly in March.
Agriculture and Natural Resources
District coal production declined moderately in recent months,
reflecting mild weather conditions. Likewise, lumber producers
report weaker output than a year earlier, as well as rising
inventories. An anticipated rebound in the U.S. housing market,
however, has led to expectations of increased lumber consumption in
the future. Crop conditions are generally good to excellent. Spring
planting is ahead of schedule in most areas. Farmers continue to
benefit from strong livestock prices relative to grain prices. The
outlook for cotton is favorable because of increased world demand
and rising prices.