January 17, 1996
Summary
The District economy continues to grow at the slow-but-steady pace
indicated in our last report. District retailers report that holiday
sales were slightly above last year's levels, but the growth rate
was below that of last year. Relative to previous reports, few plant
expansions or closings were announced in recent weeks. Most firms
report moderate sales increases. Most of the growth in residential
construction is occurring in the southern part of the District,
while much of the District's nonresidential construction is focused
in Arkansas and Missouri. Total deposits and loan demand at large
District banks increased during the last two months of 1995. The
District's winter wheat crop appears to be in fair-to-good shape.
Consumer Spending
Most District retailers report that same-store holiday sales were up
between 2 and 3 percent over last year's season, with a few
reporting increases of up to 6 percent. These rates, however, are
below last year's average increase of between 6 and 7 percent.
Discounters posted slightly higher sales growth than malls and large
department stores. Because consumers seemed to wait for last-minute
sales, the holiday season started off sluggishly, pushing many of
these sales gains to just before and after Christmas. Most
retailers, however, used less pre-Christmas discounting to stimulate
sales than in prior years. Electronics, household items, jewelry and
toys were the strongest sellers. Anticipating soft holiday sales,
retailers adjusted their orders accordingly; as a result,
inventories are generally at or below their desired post-Christmas
levels. Many retailers noted a greater use of credit and layaway for
purchases. Most expressed mixed expectations about the current
quarter, with discounters generally more upbeat.
Manufacturing and Other Business Activity
District firms report that the pace of economic activity has
remained relatively unchanged from the previous reporting period.
Some contacts report moderate increases in sales and employment.
Fewer announcements than in prior reporting periods about new
plants, plant expansions or closings were noted, but some of these
are noteworthy.
A Japanese automaker announced that it will build its first U.S. pickup truck plant in southern Indiana. The $700 million plant will open in 1998 and employ at least 1,300 workers. State incentives for the plant amount to almost $30 million. A firm distributing industrial uniforms reports that it will bring more than 300 jobs to western Kentucky when it opens a new distribution center there within the current year.
Moderate sales increases are reported by some contacts. One from northwest Mississippi reports that businesses targeting specialty markets, like gourmet stoves or home decorating, have exhibited strong growth in the last few months. Another in eastern Arkansas reports that sales at some local manufacturing firms are up between 14 and 21 percent year-to-date through late 1995 over the same period last year. A building materials supplier, though, reports sales through late 1995 are essentially unchanged from the year before. A dealer in heavy farm equipment remains upbeat even though sales in 1995 were slightly below 1994's level because 1994 was an exceptionally good year.
A recent survey of firms in various cities nationwide by a temporary employment agency reports that 13 percent of St. Louis firms and 33 percent of Memphis firms plan to hire new employees during the first quarter of this year. Nationally, 20 percent of surveyed firms indicated they will hire this quarter. Counterbalancing these reported expansions, a major St. Louis-based retailer, that is currently reorganizing under Chapter 11, announced it will close 500 stores nationwide, 16 of which are in the St. Louis area, as part of its bankruptcy resolution.
Real Estate and Construction
Residential building permits on a year-to-date basis through late
1995 were above 1994's levels in only four of the District's 12
metropolitan areas. Three of these four areas are in the southern
part of the District. In five of the remaining eight, the gap
between the two years has been narrowing recently. The number of
nonresidential building permits is well above 1994 levels and
continues to rise in half of the District's metropolitan areas.
Arkansas and Missouri cities are experiencing the strongest growth
in nonresidential construction.
Banking and Finance
Loan demand at large District banks appears to have picked up in the
last two months of 1995, after being relatively soft the previous
two months. Total loans outstanding at 11 large District banks rose
2.3 percent from mid-October to mid-December, after increasing just
0.7 percent from mid-August to mid-October. All major categories of
loans-consumer, real estate and commercial and industrial-posted
increases in the October-to-December period. Total deposits at these
banks increased 1.7 percent from mid-October to mid-December
compared with a 1.3 percent increase in the prior two-month period.
Agriculture and Natural Resources
The winter wheat crop in most areas of the District appears to be in
fair-to-good condition. Although seeding of the crop occurred under
less than optimal soil moisture conditions last fall, recent rains
and snowfall have been beneficial. Some isolated areas, however, are
still reporting dry soil conditions. Southern pine lumber mills
report that year-to-date orders and production for 1995 are modestly
below 1994's levels.