January 19, 1994
Summary
District economic activity continues to pick up, as many firms
report increases in sales and employment. District retailers report
good-to-strong sales of most types of merchandise during the holiday
and post-holiday period. Unseasonably strong single-family home
construction is providing a boost to the regional economy. Bank
loans continue to increase at a sample of large District banks.
District rice producers have been buoyed by an order from Japan and
continued strong prices.
Consumer Spending
Preliminary reports suggest that sales during the 1993 holiday and
post-holiday periods were strong. Although double-digit sales growth
was reported in isolated cases, the majority of respondents
estimated a 4 percent to 6 percent increase over the 1992 holiday
season. Many respondents cited increased advertising and a growing
economy as reasons for strong sales levels. Deep discounting has
generally not been necessary to move merchandise. In most cases,
inventories are at (expected) low levels.
Contacts indicate that furniture and household goods, including appliances and towels, were the best sellers this holiday season. Sales of toys and consumer electronics were also strong. Women's apparel and shoes, usually a strong source of holiday sales, did not do as well as expected. Most retailers are anticipating a solid 1994, with some predicting as much as 10 percent sales growth in the first half of the year. Similarly, most auto dealers contacted are expecting 1994 to equal or surpass 1993's strong year.
Manufacturing and Other Business Activity
A number of District firms report increases in sales and employment,
continuing the growth from last quarter. A refrigerator manufacturer
and a maker of bathroom fixtures both report strong sales, driven
primarily by increased housing starts; replacement of older
equipment also contributed. A poultry processor plans to add more
than 250 jobs when it expands a hatchery and processing plant to
increase production 33 percent. In Arkansas, new chrome plating and
food processing plants have led to 300 new jobs, while a Mississippi
maker of construction materials broke ground for a new plant that
will employ 150 workers by the end of the year. An airline with a
District hub will overhaul its operations and add about 300 ground
workers. The six-month-old United Mine Workers of America strike has
ended, returning about 3,000 to their District jobs.
A few minor setbacks were also reported, some of which had been anticipated. For example, an auto plant closed on schedule in December, eliminating the remaining 1,200 jobs. A bakery that was displaced by airport expansion dismissed 525 workers when it finally closed its doors, another anticipated closure. An auto parts maker will close its plant early this year, laying off more than 260 workers. A defense contractor let another 200 workers go after the cancellation of a program.
A national temporary employment agency's recent survey of the St. Louis area reveals that 12 percent of the firms plan to hire during the first quarter of 1994. This is down from 20 percent one year ago. Nationally, 18 percent plan to hire this quarter. According to a recent survey of District firms by the National Federation of Independent Businesses, 14 percent think now is a good time to expand. However, 23 percent of the surveyed firms increased their average selling price between August and November, while just 10 percent reduced prices. About 24 percent plan to increase prices during the first quarter of 1994 (4 percent will decrease prices), and 35 percent plan to increase capital expenditures. More than half of the respondents felt current inventories were at acceptable levels, but only 43 percent will keep them at the same level during the first half of the year. The remaining 57 percent are split between increasing or decreasing their inventories.
Construction and Real Estate
Single-family homebuilding is unseasonably strong in many parts of
the District, as builders scramble to start and finish projects that
were delayed in the latter half of 1993 because of wet weather.
Multifamily housing construction, after several years of stagnating,
also appears to be on the upswing as apartment occupancy rates and
rental prices edge up. Sales of new and existing homes have been
relatively strong in the District lately, as they have been
nationally, and avenge selling prices continue to rise.
Banking and Finance
Total loans on the books of 11 large District banks rose 1.7 percent
during the last two months of 1993 after a 0.1 percent increase in
the prior two-month period. All three major categories of loans-
commercial, consumer and real estate-registered positive growth
rates in the November-through-December period. Consumer and real
estate loans posted stronger growth rates in the last two months of
1993 than they did during the same period of 1992.
Agriculture and Natural Resources
A major processor of rice and rice products recently announced its
first-ever shipment of rice to Japan because of that country's poor
harvest; the company expects to make additional sales this year.
Contacts in the rice industry expect a 10 percent to 15 percent
increase in planted acreage this spring because of recent strong
prices and a reduction in government set-aside requirements. Crop
prices have risen sharply in most District states recently, while
livestock prices have retreated slightly. Increased domestic and
foreign demand for cottonseed oil continues to bolster processor
profit margins, which have tripled in the last few months. A contact
in the coal industry reports that prices are expected to soften with
the end of the coal strike. Through mid-December, coal production was running ahead of last year's pace in western Kentucky and
Indiana, but behind in other District states.