May 10, 1995
Overview
The Tenth District economy grew at a strong pace over the past
month. Manufacturers continued to operate at high levels of
capacity, homebuilding activity picked up slightly, and the
district's winter wheat crop was in good condition. Amid ongoing
strength in most sectors of the district economy, however, retail
activity appears to have slowed from its brisk pace earlier in the
year. Across the district, manufacturers continue to report
increased materials prices, although few report upward pressure on
wages. Prices at the retail level remained steady.
Retail Sales
Retailers report sluggish growth in sales over the past month and
only slight improvement over year-ago sales. While apparel sales
increased slightly, home furnishing sales were weak. Information
about the economic impacts of the Oklahoma City bombing is still
sketchy, but the disaster appears to have temporarily depressed
local retail sales. Although most retailers across the district
report expanding inventories compared with last month, current
inventory levels are generally satisfactory. Auto dealers report
flat or slightly declining sales, due primarily to higher financing
costs for consumers. Nevertheless, most dealers expect increasing
sales over the next few months.
Manufacturing
Most firms continued to operate at high levels of capacity last
month. While difficulties in obtaining materials have been rare,
some firms report longer lead times. Respondents generally regard
inventories as too high and plan to reduce stocks during the coming
months. Some firms report a sharp decline in exports to Mexico,
while others report a boost in exports to Europe.
Energy
A surge in crude oil prices in April helped boost district drilling
activity. The average number of drilling rigs operating in the
district picked up somewhat during the month, ending a three-month
decline. Natural gas prices, however, sank to their lowest levels in
three years and continued to curb overall activity in the district's
energy industry.
Housing
Builders report housing starts were up slightly last month due to a
pickup in single-family and multi-family construction. Housing
starts remain below their year-ago level, though, and most
respondents expect building activity to remain sluggish during the
coming months. Some builders report sales of new homes remained
stable over the past month but were ahead of their year-ago pace.
Building materials were generally available with few delays. While
mortgage demand continued to decline, lenders expect demand to level
off or improve slightly in the near term.
Banking
Loans at reporting banks increased last month. Almost all banks saw
gains in commercial and industrial loans. Demand was up slightly for
consumer loans and commercial real estate loans, flat for home
equity loans and agricultural loans, and down slightly for
residential construction loans. Loan-deposit ratios were generally
up from the previous month, while security investments were down
slightly.
No respondents changed their prime rate last month and none expect to do so in the near term. Few banks altered their consumer lending rates last month, and none anticipate changes in the near future. Lending standards also were unchanged.
Deposits were up slightly last month. Demand deposits, money market deposit accounts, large CDs, and small time and savings deposits rose slightly, while changes in NOW accounts were mixed.
Agriculture
District agricultural bankers report the winter wheat crop was in
good condition last month, with recent rains brightening yield
prospects. While crops in some parts of the district were damaged by
an early-April frost, the damage was localized. Spring planting has
generally progressed on schedule. Most farmers have completed
fieldwork, although wet weather has hindered planting in some areas.
Cash rents on district cropland are unchanged from 1994, indicating
expectations for flat farm income in 1995.
Cattle feedlots in the district were relatively full last month but held fewer cattle than a year ago. Bankers remain cautious about lending to cattle feeders, as many fear a possible drop in cattle prices this fall. Despite record supplies of beef and low cattle prices during the past year, few district cattle producers are reducing their cow numbers.
Prices and wages
Retailers report stable prices due to sluggish sales, subdued wage
pressures, and increased competition. Most retailers expect sales to
pick up over the next three months, but expect prices to remain
steady. While manufacturers report some shortages of skilled labor,
few report significant wage increases. Prices of industrial
materials, on the other hand, have increased from last month and
last year.