Beige Book Report: St Louis
September 13, 1995
Summary
The District economy continues to grow at a pace largely unchanged
from recent reports. While plant closings, employee layoffs and
sales declines are still occurring, they appear to have been mostly
offset by plant expansions, new hiring and sales gains. In a survey
of District small businesses, most foresee little change in economic
activity over the last half of this year. Although new housing
permits around the District, except in Memphis, are still below last
year's record levels, the pace of issuance has picked up in recent
months. Nonresidential construction appears to be rising in Little
Rock, while it continues to grow steadily in Louisville. Total loans
outstanding at large District banks continue to increase. The hot,
dry weather has hurt the yield potential of some crops in many areas
and has caused significant losses in the poultry industry.
Manufacturing and Other Business Activity
District economic activity is little changed from recent reports.
While some note plant closings and layoffs, others see increasing
sales and pockets of tight labor markets. A telecommunications firm
reports gains in employment levels because of new contracts it has
negotiated. After a reported decline in the District's wood
furniture industry, a contact now states that it appears poised for
an upturn. Contacts at firms fabricating metal and manufacturing
commercial hardware report production at "full throttle." Sales at
firms in many industries-prefabricated metal buildings, electric
motors, brick manufacturers and scrap metal, for instance-are up on
average between 7 percent and 15 percent so far this year. One
contact from northwest Mississippi stressed that labor markets are
still very tight in the area, leading some companies to lure
employees from other companies. Reports from Memphis and St. Louis
relate instances of fast food restaurants posting help wanted signs.
There are some areas of decline, though. Reported layoffs from downsizing and plant closings are scattered throughout the District; such layoffs are slightly more concentrated in durable goods producers than in other industries. A few auto parts manufacturers and makers of industrial boilers and air conditioners point to declining sales as the reason for the employment losses. Some nondurable goods manufacturers also report recent setbacks. An apparel manufacturer announced layoffs because of declining market share. A food producer, although undergoing a plant renovation, is laying off workers as part of a nationwide downsizing effort.
Outlook
A survey of about 225 small businesses in the Eight District found
that most expect little change in business conditions over the last
half of 1995, although the number expecting the business climate to
worsen outnumbered those who expect a more favorable outlook by
almost two to one. A little more than half of firms do not plan to
change their selling prices over the next three months, with about
20 percent planning to raise prices, less than 3 percent planning to
reduce prices, and the remainder uncertain. More than 75 percent of
surveyed firms plan no change in employment levels over the next
three months, with 16 percent planning to add and another 5 percent
planning to reduce the number of employees.
Real Estate and Construction
Although residential permits on a year-to-date basis continue to be
below last year's record levels in all major District metropolitan
areas except Memphis, where they are up about 6 percent, the gap
between this year and last appears to be narrowing. Louisville,
Little Rock and St. Louis all report permit levels down between 10
percent and 17 percent, but these rates of decline are slowing.
Sales in St. Louis, however, continue to be strong, as turnover
times have shortened. New nonresidential construction is up in
Little Rock and Louisville, relatively flat in St. Louis and down in
Memphis so far this year.
Banking and Finance
Total loans outstanding at 12 large District banks continue to
increase. Total loans outstanding rose 2.6 percent between mid-June
and mid-August, after rising 1.9 percent in the prior two-month
period. Real estate loan growth is responsible for much of the
growth in total lending, as it rose 4.8 percent between mid-June and
mid-August and 2.8 percent between mid-April and mid-June.
Commercial and industrial lending has tapered off somewhat, rising
just 0.5 percent in the most recent two-month period after a 3.1
percent increase in the prior two-month period. Consumer loan growth
is soft, rising 0.8 percent from mid-June to mid-August after
declining 3.5 percent between mid-April and mid-June.
Agriculture and Natural Resources
Hot, dry weather has been the rule rather than the exception for
most of August, although showers were widespread enough to keep
crops in mostly fair to good condition. The heat has caused poultry
losses numbering in the tens of thousands in Arkansas and
Mississippi and has also damaged the cotton crop in many of these
areas. In addition, many Delta cotton farmers report an outbreak of
insects, causing them to incur additional crop-related expenses. In
one Mississippi county, insects reportedly destroyed 30 percent of
the crop and severely damaged another 40 percent. Southern pine
lumber producers report that year-to-date orders, production and
shipments are all down 3 percent to 4 percent from last year's
levels.