Beige Book Report: St Louis
June 19, 1991
The District economy is flat, but some signs of strengthening are evident. Retail sales have improved slightly and residential construction has rebounded in some areas. Most service-producing sectors continue to add employees. While some manufacturers are expanding their operations, many are still contracting and commercial construction remains depressed. Lending activity has increased in recent months. Heavy rains have delayed cotton and rice plantings. Electricity generation for industrial usage is flat to slightly lower.
Consumer Spending
Some contacts report slight increases in retail sales; in the
Louisville, St. Louis and Memphis areas, however, little or no
strengthening is evident. Nominal retail sales growth in Arkansas
has dropped to a 1 percent rate of increase in recent months. Sales
of durables in Arkansas have been hindered by consumer wariness
about economic conditions and increases in required down payments.
Auto sales remain well below year-ago levels, though some contacts
report increasing sales in May. Louisville auto dealers describe
spring sales as "acceptable" but still below those of a year
earlier.
Manufacturing
Manufacturing conditions are mixed. In St. Louis, some manufacturers
report a recent upturn in orders, but relatively few have expanded
their workforce. Approximately 2,000 St. Louis workers were let go
when an automaker closed an assembly plant in late May. More than
300 engineering and manufacturing workers have been laid off in
recent weeks by a major St. Louis defense contractor following the
loss of a new military aircraft contract, and an additional 200
layoffs are expected by year-end. Defense cuts have caused layoffs
at smaller District firms as well. Weak auto and housing sales have
led to lower earnings for a major chemicals manufacturer. Almost
1,000 workers have been recalled by a Louisville home appliance
manufacturer in anticipation of increased demand for refrigerators
as the housing industry turns around.
Construction and Real Estate
Single-family home sales continue to increase throughout the
District. Contacts in Little Rock and Memphis indicate inventories
of new and existing homes are declining; meanwhile, prices are
holding steady or rising slightly. New home construction, however,
is mixed. Contacts in Memphis, citing lower interest rates and drier
weather, report single-family housing starts in May were
substantially above their April and year-earlier levels. Contacts in
St. Louis, however, report residential construction is still well
below year-earlier levels and believe the industry has not bottomed
out.
Banking and Finance
Total loans on the books of a sample of 93 small and mid-size
District banks increased slightly in April and May after declining
during the previous two months. Still, loan demand throughout the
District remains weak. One St. Louis banker noted his customers--
primarily small and mid-sized companies--were still concerned about
the economic outlook and were hesitant to borrow for investment
purposes.
Agriculture
Cotton and rice plantings have been delayed substantially in
Mississippi, Arkansas and western Tennessee because of record or
near-record rainfall. Mississippi appears to be the hardest hit of
the District states: as much as 20 percent of the intended cotton
acreage and 40 percent of the intended rice acreage will not be
planted. Many areas are reporting wheat crop losses of 50 percent or
more because of moisture-related diseases. On the other hand, the
corn, soybean and tobacco crops are in good condition.
Energy and Natural Resources
Above-average temperatures in May boosted electricity output
significantly. A survey of District utilities found that peak
electricity generation at many plants was the highest in several
years. Generation for industrial usage, however, was mostly flat to
slightly lower at major utilities. Year-to-date coal production is
down almost 10 percent. Many District utilities continue to "test-
burn" low-sulfur Western coal, which reduces demand for higher-
sulfur Midwestern coal. Production at Southern Pine lumber mills
rose in March, but remains below last year's pace.
Transportation and Distribution
Year-to-date passenger traffic is down slightly at all major
District airports. Air cargo shipments in Memphis, however, have
increased more than 15 percent. Airport officials report that lower
air fares, the end of the Gulf War and lessened security measures
are expected to boost airline traffic. Barge activity is mixed.
Little Rock and Louisville report increased movements over last
year, while St. Louis reports a decline. The rates charged for barge
transportation in St. Louis--a barometer of river traffic--have
fallen to record lows because of declining grain shipments.