Beige Book Report: St Louis
September 11, 1996
Summary
District economic growth has continued to moderate slightly.
Retailers in most parts of the District report that sales are up
over the same period last year and that back-to-school sales have,
so far, met expectations. Tight labor markets continue to be a
concern for most contacts. A recent survey of small businesses notes
expectations of a slight deterioration in business conditions over
the next six months. Sales of new and existing homes around the
District have increased recently. Loans outstanding at large
District banks continue to decline. Despite persistently dry
conditions in parts of the Districts, crops generally remain in
fair-to-good shape.
Consumer Spending
Most retailers surveyed report summer sales increases of up to 5
percent over the same period last year. Some St. Louis retailers,
though, note declines in sales during June and July. Most retailers
have not used and do not anticipate using much discounting to move
merchandise. Back-to-school sales have generally met expectations,
although many had lowered expectations from the previous year. A few
are reporting increased wage pressures. Almost all retailers expect
sales to pick up in the fall.
Most auto dealers report either no change or a slight increase in sales levels. Those facing flat or declining sales blame their troubles in part on higher interest rates. Some import dealers report a shortage of product. Most contacts report a lower-than- usual stock of 1996 models as they begin the new model year. The balance between new and used car sales has not shifted recently. Most contacts expect sales levels to increase somewhat for the rest of the year.
Manufacturing and Other Business Activity
District contacts continue to report growth in sales and employment
in most instances, but some plant closures have also been observed.
According to most contacts, labor markets are still tight. For
example, a major hotel and catering chain is seeking about 2,000
workers in the St. Louis area in the coming year. It has held
numerous job fairs and established a toll-free phone number to
search for and aid applicants. A national food processing firm is
building a new plant in southern Indiana that will employ 200. A
contact in the construction materials industry reports that sales of
brick are up about 10 percent over the same period last year. A
railroad company will move about 400 jobs to St. Louis from Denver
by year's end. District automotive plants expect output to rise
considerably in the fourth quarter and to be up strongly on a year-
over-year basis.
The District apparel industry has taken a hit recently, though. One firm in Kentucky will close this month and eliminate about 350 jobs. A firm in Arkansas will lay off about one-third of its workforce (slightly more than 100 workers) because demand has declined. A St. Louis-based food processing company sold off its cereal division, eliminating about 150 jobs from its headquarters. The strike that is affecting McDonnell Douglas remains unsettled. For the most part, the effects on the local economy appear to be isolated.
Outlook
According to a recent survey of 216 small businesses in the Eighth
District, a little more than half of the firms expect no change in
business conditions for the remainder of the year. On the margin,
though, the outlook for business conditions over the next six months
has tempered somewhat compared with a similar survey conducted three
months earlier, with the number of respondents anticipating a
worsening of conditions modestly outnumbering those expecting an
improvement. Slightly more firms plan to reduce inventory levels
over the next six months than in the previous period, while about
one-fifth of the respondents plan to increase prices-a number that
is unchanged from the previous survey and is considerably more than
the 2 percent who plan to reduce prices over the next three months.
Real Estate and Construction
Sales of new and existing homes are up in most parts of the
District. In many cases, sales in July were up about 10 percent over
the same period last year, and up about 7 percent over June. Only
five of the District's 12 metropolitan areas saw monthly increases
in their July residential construction permit numbers, though; three
of them are in Arkansas. All metro areas except Memphis are above
their year-ago permit levels. Some commercial real estate agents
continue to note a moderation in the market.
Banking and Finance
Total loans outstanding at 11 large District banks declined 0.6
percent between mid-June and mid-August, compared with a 0.3 percent
decline in the prior two months and a 2.6 percent rise in the same
period one year ago. Consumer loans dropped a sharp 1.7 percent,
while commercial and industrial loans declined 0.9 percent. Real
estate loans were up 1.3 percent compared with a 4.8 percent
increase one year ago.
Agriculture and Natural Resources
Dry weather continues to affect crop conditions adversely in most
parts of the District. The driest conditions appear to be in
southern Illinois, southeastern Missouri and northeastern Arkansas.
In several isolated areas, crop conditions are significantly worse.
For example, some farmers in parts of south-central Illinois report
that little moisture has been received since late May, causing
considerable harm to the corn and soybean crops. Overall, though,
most crops still appear to be in fair-to-good condition.