Beige Book Report: St Louis
January 21, 1993
Summary
District economic activity, sparked by a strong holiday sales
season, continues to show signs of improvement. Holiday sales were
generally strong throughout the District, and most retailers are
optimistic about 1993. Manufacturers report increases in sales and
employment. Single-family home construction continues to buoy the
District's economy. Nonresidential construction is on the rise in
St. Louis. Loans outstanding at large District banks continue to
register small increases. According to District farmers, record or
near-record harvests were the rule rather than the exception.
Consumer Spending
Retail sales of general merchandise in the District made a strong
comeback during the holiday season. Many contacts report double-
digit increases in sales compared with a year ago. Two extra days
between Thanksgiving and Christmas gave retailers more time to
attract early shoppers, although aggressive marketing strategies
apparently were unnecessary as the level of price-cutting and
advertising remained relatively low. Holiday shoppers focused on
mainstays such as electronics, jewelry and small appliances, while
holding off on the luxury and big-ticket items. Discounters
reportedly fared better than the specialty and department stores. A
number of merchants report that more customers paid for purchases
with cash this year than in previous years. Inventories remain
fairly steady at desired levels. Retail merchants are optimistic
about the growth of sales during the early part of 1993, citing the
strong holiday season and a more positive consumer attitude about
the direction of the economy.
District auto sales are reported to be moderately strong, although in Arkansas, many dealers called the past quarter the worst in years. Sales of mid-sized, moderately priced cars still outpaced the sales of all others, particularly upscale models.
Manufacturing and Employment
Reports from District manufacturing contacts are more upbeat than
they have been in recent months. Many speak of increases in both
sales and employment. A contact in the burglar alarm industry
reports that sales are up 76 percent over last year's level.
Contacts in the heavy equipment industry state that sales increased
during the fourth quarter of 1992 and are expected to remain strong
in the short term. Nonetheless, sales remain below peak levels, and
inventories are at their lowest level since 1975-76. A beverage and
grocery distributor reports that orders and inventories have been
stable at desired levels. A concern of most contacts throughout the
District is the lack of qualified workers available in the market.
Small businesses worry about the rising cost of health care.
Other reports show District poultry producers and auto parts suppliers increasing employment because of expansions and increased demand. In addition, a major household appliance manufacturer is not only recalling 650 workers laid off during the holiday season, but expects to hire an additional 550 during the first quarter to meet demand. A District shoe manufacturer has secured a contract to begin selling its products in four major Chinese cities. A St Louis defense contractor, however, continues to shrink with 320 more layoffs.
A recent survey of firms in the St. Louis area reveals that approximately 20 percent will hire new employees during the first quarter, while only 8 percent plan layoffs. Nationally, 17 percent of employers plan to hire, while 13 percent plan to cut employees.
Construction and Real Estate
Most areas of the District finished 1992 with single-family housing
permits substantially above their year-ago levels. Homebuilders cite
low interest rates, increases in consumer confidence and a surge of
starter-priced housing as reasons for the continuing improvement.
New and existing home sales an also up in most parts of the
District; though home prices are generally flat, some increases have
been reported. Contacts in St. Louis note that nonresidential
construction is showing signs of expansion, with public works
projects and new factories accounting for the growth spurt. These
same contacts report that the level of nonresidential construction
is still running about 20 percent below the boom years of the mid-
1980s.
Banking and Finance
Consumer and business loan demand appears to be strengthening. Loans
outstanding at 12 large District banks increased 0.7 percent in
November and December, after declining 0.5 percent during the prior
two-month period. Business loans and consumer loans increased in
November and December, while real estate loans, the largest portion
of these banks' combined loan portfolio, declined 2 percent during
the period after a 0.8 percent decline in September and October.
Agriculture and Natural Resources
Farmers reported record or near-record harvests in many areas,
although some corn has yet to be harvested in the northern region of
the District. While prices received by District farmers have risen
somewhat recently, they remain below last year's levels. Substantial
amounts of precipitation were reported in many areas of the District
in late December and early January. The demand for natural gas in
some parts of the District has reportedly increased markedly, owing
to increased drying of the recently harvested corn crop. Cotton
producers in the southern portion of the District report that the
quality of 1992's cotton crop was excellent. Southern pine lumber
mills report that orders have declined slightly, but that production
remains substantially above that of last year.