Beige Book Report: Kansas City
September 8, 1993
Overview
The Tenth District economy is still growing moderately. Retail sales
are up, housing activity is increasing, and demand is up for
consumer loans and home mortgages. The energy sector continues to
improve, and farm income prospects remain healthy despite the wet
weather and flooding. Retail prices generally remain steady, while
manufacturers input prices are rising modestly.
Retail Sales
District retailers report that sales are up both from a year ago and
a month ago. Retailers generally expect sales to increase further in
the next few months, and most plan to increase inventories over that
period. Retail prices are generally holding steady and are expected
to change little in the months just ahead.
Most auto dealers report continuing strong sales over the past month. Financing is readily available for dealers and for creditworthy buyers. Most dealers are trimming their inventories of 1993 models and expect sales to remain strong for the remainder of the year.
Manufacturing
Most purchasing agents report that input prices are modestly higher
than a year ago. Input prices are expected to remain at current
levels in the near term. A few purchasing agents report problems
getting materials because of the flooding, but they do not expect
the problems to be long term. Some respondents are trimming
inventories, while others are increasing inventories. Many plants
are operating near capacity but with few bottlenecks. Exporting
firms expect foreign sales to remain steady or increase slightly.
Energy
Improvement in drilling activity in the district continues despite
generally low oil prices. The average number of operating drilling
rigs in district states rose from 240 in June to 249 in July. During
the first three weeks of August, the district rig count climbed to
259. As a result, the average rig count stands about 17 percent
higher than during the same period a year ago.
Housing
Builders report that housing starts are down slightly from a year
ago due to the weather. Still, starts are up from last mouth and are
expected to increase for the rest of the year. Strong demand for new
homes has reduced the stock of unsold homes and increased prices of
new homes. Materials prices are also up and are expected to rise
slowly in the near future.
Mortgage demand is strong but is expected to wane slightly as winter approaches. Mortgage rates have fallen further in recent weeks but respondents do not expect them to fall much more over the rest of the year.
Banking
Growth in loan demand last month was mixed, with half the survey
respondents reporting increases in loan demand and half reporting no
change. Commercial and industrial loan demand was mostly unchanged.
Demand was up at most banks for consumer loans and home mortgages.
Home equity, home construction, and commercial real estate loans
were constant to up. Loan-deposit ratios were constant to up,
compared with both the previous month and a year ago.
None of the respondents changed their prime rate last month, and none expect to change it in the near term. A few banks lowered consumer lending rates, but most banks reported no change. Lending standards were unchanged.
Deposit flows of responding banks were also mixed last month. Half reported decreases in deposits, while half reported either no change or increases. Demand deposits and NOW accounts were constant to up at most responding banks. IRA and Keogh accounts, large CDs, and small time and savings deposits were constant to down at most responding banks.
Agriculture
Heavy rains and flooding have reduced the expected size of the
district's crop of corn and soybeans. Much of the crop in low-lying
areas along the Missouri River and its tributaries in Missouri,
Kansas, and Nebraska will be a total loss. Moreover, wet weather has
delayed the maturity of the remainder of the crop, leaving it
vulnerable to an early cold snap. The district's winter wheat
harvest is now complete and crop yields were generally very good,
although in some areas yields and quality were reduced by heavy
rains, hail, and disease. In Oklahoma, the cotton and peanut crops
remain in good condition.
The smaller-than-expected corn and soybean crops--key ingredients in livestock feed--have pushed up feed costs and trimmed profits somewhat for district cattle and hog producers. In response, some cattle feeders have reduced cattle inventories. The district's large-scale pork producers, however, maintain rigid production schedules that are unfazed by modest changes in feed costs.
Overall, despite the recent weather problems, prospects for farm income in the district remain healthy. While crop losses caused by wet weather and flooding will create financial hardship for many district farmers, higher crop prices will boost incomes for the majority who escaped the flooding and expect to harvest normal or near normal crops. Meanwhile, despite somewhat higher feed costs, strong cattle and hog prices continue to support solid earnings for most district livestock producers.