June 17, 1992
Summary
Manufacturing activity remains mixed, with some firms reporting
gains and others reporting declines in both sales and employment.
Nonmanufacturing employment continues to grow. Consumer spending
appears to be on a steadily increasing trend. Single-family home
construction still is up sharply from year-ago levels. Loan demand
appears to have weakened over the past two months. Dry soil has
delayed planting and adversely affected crop conditions in many
parts of the District.
Manufacturing
Expectations for continued manufacturing growth, based on reports of
increased sales and employment by many District firms, were
moderated by reports of layoffs and plant closures at other firms.
In one indication of growth, a survey of Arkansas paper producers
reveals year-to-date sales increases of 8 percent to 20 percent. A
food producer's expansion in Tennessee will add 600 jobs to the
local economy. A district manufacturer of heating and cooling
systems reports significantly increased orders this quarter for
cooling equipment and expects orders for heating equipment next
quarter to be as strong. A manufacturer of industrial hydraulic
components indicates that domestic and foreign orders are quite
vigorous and that the firm has a substantial backlog.
Offsetting these gains, a Missouri-based shoe manufacturer recently announced its third round of plant closures, which will eliminate more than 1,400 jobs by September. A maker of hospital thermometers will close its Missouri and Illinois plants and move production to Mexico over the coming six to 18 months, affecting about 135 jobs. A St. Louis defense contractor laid off 134 workers on one project, even though it continues to hire new employees for a different project.
Nonmanufacturing
Employment growth in District nonmanufacturing firms continues to
strengthen. As part of their Little Rock consolidations, an
information services firm and a telecommunications firm together
will hire about 300 local employees. By August, a dockside casino
will open in northern Mississippi, employing more than 400. On a
broader note, a national temporary employment service reports that
37 percent of the surveyed Memphis firms, 28 percent of the surveyed
St. Louis firms and 13 percent of the surveyed Little Rock firms
will increase employment during the third quarter.
Consumer Spending
Non-auto sales are moderately higher than one year ago. Although the
late Easter season is cited for the strong sales, preliminary
indications point toward continued strength in May. After a slow
start in the first quarter of 1992, increased sales in the last two
months appear to have started a trend that many retailers expect to
continue through the end of the year. Quarterly auto sales show no
change from one year ago, although a few dealers note increases over
the last few weeks.
Construction and Real Estate
Single-family home construction continues to rebound strongly.
Little Rock, Louisville and St. Louis builders all report double-
digit increases in April housing permits from one year ago; Memphis
builders were an exception, reporting an increase of only 1 percent.
Commercial construction activity, except for public works projects,
remains stagnant. Observers note, however, that office occupancy
rates in both St. Louis and Little Rock have edged up slightly since
the end of 1991.
Banking and Finance
Loan demand, as indicated by changes in loans outstanding at
District banks, appears to have weakened somewhat since the last
report. Total loans outstanding at large District banks rose just
0.1 percent in April and May, after a 0.8 percent increase from mid-
February to mid-April. Loans on the books of a sample of small and
mid-sized District banks rose 0.8 percent, after a 1.2 percent
increase in the previous period. At both sets of banks, the slowdown
appears to be concentrated in the consumer and real estate loan
portfolios.
Agriculture and Natural Resources
Inadequate rainfall has caused some Illinois, Kentucky and Missouri
farmers to delay soybean planting and has produced weed and insect
problems in some Arkansas cotton and rice fields. One-third of
Mississippi's cotton crop is in poor condition. Unseasonably cool
weather in late May hampered the growth of corn and soybeans in the
northern parts of the District. Despite these concerns, most other
District crops are in fair condition. Southern pine lumber mills
report that exports, production and orders all are up significantly
from last year. Nonetheless, weather conditions in parts of the
Midwest and New England have recently reduced lumber demand
slightly. Lumber prices remain substantially above year-ago levels.