Beige Book Report: St Louis
March 9, 1994
Summary
District economic activity, especially in the eastern and southern
parts of the District, has been hampered somewhat by severe winter
weather. Sales and employment reports from other parts of the
District are mixed. Residential construction activity, while slow in
some areas because of ice and heavy snow, continues to be
unseasonably strong. Most categories of loans outstanding at large
District banks have grown in recent months.
Manufacturing and Other Business Activity
Sales and employment reports from District firms are mixed. Severe
weather, especially in the eastern and southern portions of the
District, has hampered business operations and forced many small and
large businesses to close temporarily. Auto plants in Louisville and
St. Louis, operating with just-in-time inventory systems, shut down
because snowy and icy conditions prevented the delivery of parts.
Interstate commerce in the Louisville area was suspended for about
four days when a record 16-inch snowfall effectively shut down the
city and interstate highways. Many small businesses were closed for
almost a week, incurring losses not easily recouped. Memphis and
Little Rock also experienced icy conditions severe enough to close
many businesses and government operations. Parts of southern
Arkansas and northern Mississippi were without power for almost two
weeks after the ice storm knocked out power lines and toppled
electrical towers.
Several employment reductions were reported that were unrelated to bad weather. The most prominent was from a shoe manufacturer, which had already downsized. This manufacturer announced another 5,660 layoffs nationwide, almost 1,750 of which are in Missouri, and the closing of five factories and numerous retail outlets because of increased foreign competition. An aluminum producer released 350 workers because of a worldwide excess supply of aluminum. A beverage company moved an Illinois instant tea plant to New Jersey, eliminating 180 District jobs. A St. Louis-area school district will lay off 700 employees, 400 of whom are teachers, because of budget shortfalls.
On the other hand, numerous expansions throughout the District have been announced. For example, a mortgage company will open a loan processing center in St. Louis, initially employing 500 workers, with 1,500 more workers expected to be added within the next two years. An appliance producer in Louisville has already added more than 350 people this year because of high demand for its products. The poultry industry continues to grow, with one firm expanding its processing plant and hatchery, adding 175 workers, and another soon opening four new plants (exact locations not yet determined). A bicycle manufacturer is coming to Missouri with 500 jobs, and a trucking company is hiring 500 more St. Louis employees to meet its shipping demands. In addition, various manufacturers report sales increases in January of between 4 percent and 30 percent over one year ago. Finally, a Mississippi manufacturer of bathroom fixtures reports that it has made its first export shipment to Japan.
Construction and Real Estate
A backlog of orders resulting from wet weather in 1993 continues to
keep area homebuilders busy, despite occasional stoppages because of
more recent inclement weather. In St. Louis, more single-family
permits were issued in December than in any other month of 1993.
Severe winter weather in Louisville brought construction to a
standstill for several days, although January permits held steady
from their year-ago level. In Little Rock and Memphis, construction
activity remained above its year-ago pace during the last two months
of 1993. Recent increases in lumber prices are being passed on to
homebuyers; in St. Louis, builders expect new home prices to rise 3
percent to 5 percent as a result.
Banking and Finance
Total loans on the books of 11 large District banks decreased 2.7
percent in January after a 1.1 percent increase in December. The
decline in total loans was due entirely to shrinkage in real estate
loans, which fell 6.4 percent during the month. Business loans rose
3.1 percent in January and consumer loans rose a modest 0.3 percent.
District bankers continue to report modest increases in loan demand
from both commercial and retail customers.
Transportation and Natural Resources
Severe winter weather disrupted transportation in the Eighth
District over the past month. A record January snowstorm forced the
Louisville airport to close for approximately 24 hours, causing a
major parcel package distributor there to incur tens of millions of
dollars of additional expenses and lost revenues. The snowstorm also
closed most of the state's major highways, substantially delaying
shipment of goods that traverse the state. In February, a major ice
storm caused significant disruptions in southern Arkansas, northern
Mississippi and parts of Tennessee. The Memphis airport did not
close, but operated at reduced capacity for two days.
The Army Corps of Engineers reports rising river levels in many places along the Mississippi and Ohio rivers. In some cases, this is normal for this time of year. Reports from the Corps and the National Weather Service predict that, over the next 30 days, the Mississippi River will exceed flood stage in some areas south of St. Louis and approach flood stage north of St. Louis. No major flooding is expected at this time, however.
Southern pine lumber mills report that orders on a year-to-date basis are down nearly 12 percent over the same period last year. An industry contact, however, reports that such mills expect to see some increase in demand stemming from the rebuilding efforts in the aftermath of the California earthquake.