May 6, 1992
Summary
The District economy continues to recover. In recent weeks, several
manufacturing firms announced plans to increase employment and
expand production facilities. Residential construction activity is
being spurred by low interest rates and good weather. District loan
demand has increased slightly. Preliminary estimates indicate
increased acreage for most District crops.
Manufacturing
District manufacturing employment has shown signs of increasing, as
positive reports from firms continue to outpace negative reports.
Topping the list, a major automaker plans to spend $650 million to
expand its Louisville plant and add 1,400 new employees by summer
1993. Northeast Arkansas continues to grow as a major steel center
with the announcement of plant openings by two firms by January;
combined, they will hire about 300 workers. Arkansas also will award
approximately $35 million in additional highway contracts this year,
an increase that is expected to generate a significant number of
jobs. A construction equipment manufacturer will add 150 jobs at its
new worldwide distribution facility in Tennessee. A major Louisville
oil refinery intends to hire an additional 100 persons as part of
its expansion. In Arkansas, an aluminum products maker reports an
increase in overtime to meet demand, and a school bus manufacturer
recalled several hundred employees to resume full production.
Despite the recovery, layoffs and closings continue to occur throughout the District. A food producing plant in Evansville, Indiana, announced its closing within the next year, eliminating 300 jobs. A St. Louis defense contractor laid off another 155 workers after cuts of more than 11,000 in the last one and one-half years. A maker of bathtubs and sinks, employing 345 workers, is closing its Louisville factory by year's end because of dwindling product demand. An Arkansas plastics company closed last month, eliminating more than 200 jobs. Because of bankruptcy by some of its major customers and its own heavy indebtedness, a children's clothing manufacturer in Kentucky will close in June and eliminate 310 jobs. The effects of this closure may be more than offset, however, by this winter's opening of a cookie and cracker maker in the same town bringing 500 jobs.
Nonmanufacturing
District nonmanufacturing employment has grown steadily in recent
months, and reports indicate continued expansion. A St. Louis
construction company's contract to build housing in Israel recently
was doubled to $100 million. A mortgage company intends to hire
about 100 Louisville workers this year rather than the original
estimate of 75. Health services continued to grow in St. Louis, with
400 new positions added in February. In Louisville, however, a
health organization plans to reduce costs by cutting 275 jobs from
three of its hospitals.
Construction and Real Estate
Residential construction activity continues to improve from its
year-ago level. Favorable weather and low interest rates have
provided most of the recent stimulus. Most builders believe,
however, that the current pace of activity cannot be sustained;
nevertheless, they believe 1992 will be a good year for the
industry, especially when compared with the two previous years.
While some builders still report difficulty in obtaining
construction financing, others report credit is easier to obtain now
than it was a year ago. In Memphis, builders note that "trade up"
buyers are beginning to return to the market; earlier in the year,
most new home sales were to first-time homebuyers. Builders also
report that new home prices have begun to rise because of a
combination of increased demand and record lumber prices.
Banking and Finance
Loan demand appears to be on the upswing. Total loans outstanding
increased 0.8 percent at large District banks from mid-February to
mid-April, while rising 1.2 percent at a sample of small and mid-
sized District banks. All major categories of loans--real estate,
consumer and business--showed increases at large banks during the
period, and all categories but consumer loans, which declined 0.1
percent, rose at the small and mid-sized banks.
Agriculture and Natural Resources
Early reports indicate that District farmers intend to increase
planted acreage this year for corn, rice, sorghum and, to a lesser
extent, cotton, but decrease acres for soybeans. Except for the
northern parts of the District, the winter wheat crop is mostly in
fair-to-good condition. Soil moisture is generally adequate, with
spring planting proceeding normally in most areas. A major
fertilizer producer in the District reports greater demand, citing
increased national corn acreage and increased exports to the former
Soviet Union. An informal survey of District agricultural lenders
suggests that operating loan demand is virtually flat compared with
last year. Despite initial concern., the March freeze resulted only
in minor damage to most of the District's fruit and vegetable crops.
Year-to-date District coal production is down about 6 percent from a
year earlier.