December 9, 1992
Overview
Tenth District economic activity continues to expand moderately.
Retail sales including new car sales are improving, housing starts
and new home sales are still rising, and activity in the energy
industry continues to pick up. Moreover, bank loan demand has
strengthened during the last month. In agriculture, the effect of
weaker crop prices has been nearly balanced by gains in the
livestock sector.
Retail Sales
District retailers report an improvement in sales over the past
month. Sales have been strong in a variety of categories, including
durable goods such as computers, appliances and carpet, as well as
soft goods such as women's apparel. Selling prices have remained
stable or have fallen, and are expected to remain stable over the
next three months. Retailers foresee a significant improvement in
sales over the same period, sparked by a better-than-average
Christmas season. Most retailers express satisfaction with current
inventory levels and expect to hold them steady over the next three
months.
Automobile sales were up slightly from last month and most dealers are optimistic about future sales. Financing is generally available for both dealer inventories and potential car buyers. Dealers are expanding inventories slightly because of the new model year and increased showroom traffic.
Manufacturing
Most purchasing agents report steady to slightly higher input prices
in the past month and expect a similar trend over the month to come.
Some firms report longer lead times for obtaining some materials,
but availability is not a problem. Firms are either maintaining
current inventory levels or are trimming inventories due to seasonal
factors. Most firms are still operating at well below capacity.
Firms that export generally report improved sales abroad.
Energy
Drilling activity continues to pick up, especially in the district's
natural gas fields. The average number of operating drilling rigs in
district states increased from 250 in September to 291 in October.
This recent jump in drilling activity pushed the region's rig count
16.2 percent above its year-ago level.
Housing
Single-family housing starts are up sharply over the past year and
the past month, but multifamily starts remain flat. Builders expect
housing starts to remain strong over the next three months despite
colder weather. Sales of new homes are also substantially higher
than both last year and last month, and inventories are low.
Mortgage demand and commitments are strong due largely to
refinancing, but are expected to weaken due mainly to seasonal
factors. Respondents express considerable uncertainty about the
direction of mortgage rates. Prices of new homes are up moderately,
largely reflecting past increases in the price of lumber.
Banking
District bankers report somewhat stronger loan demand during the
last month. Demand was up for home mortgages, commercial and
industrial loans, and agricultural loans. The demand for consumer
loans and home construction loans was unchanged, however, and the
demand for commercial real estate loans weakened slightly. The loan
to deposit ratio for district banks was higher compared with both a
year ago and a month ago. The level of bank investments was
unchanged over the last month.
District bankers held their prime lending rates steady last month, and most respondents expect no further change in the near future. District banks recently cut their consumer lending rates, but do not expect further changes in consumer rates in the near term. Respondents report no changes in their other lending standards.
A majority of the respondents experienced deposit inflows in the last month. The growth in deposits was primarily in demand deposits, NOW accounts, and MMDAs. Small time and savings deposits fell slightly in the last month, while large certificates of deposit were unchanged.
Agriculture
The district's fall harvest is nearing completion slightly later
than normal due to wet weather. Corn and soybean yields are
generally well above average, and milo yields are about average.
While the wet weather has slowed the fall harvest, it has encouraged
development of the recently planted winter wheat crop, which is in
generally good condition.
The harvest of large corn and soybean crops has pushed down feed prices, boosting profits for cattle feeders. With stronger profit margins, district feedlot operators are feeding more cattle than a year ago.
The uptick in profits for cattle feeders has helped offset the effects of weaker crop prices on farm incomes. Some dryland wheat producers face weaker incomes due to the low yields and weak prices. Overall, district bankers expect timely paydown of most farm loans.