Beige Book Report: St Louis
October 16, 2013
Economic activity in the Eighth District has grown at a moderate pace since the previous report. Recent reports of planned activity in manufacturing and services have been positive. Reports from contacts in the retail sector have also been generally positive. Residential as well as commercial and industrial real estate market conditions have continued to improve. Total lending at a sample of small and midsized District banks decreased from mid-June to mid-September.
Manufacturing and Other Business Activity
Reports of plans for manufacturing activity have been positive since our previous report. Several manufacturing firms reported plans to add workers, expand operations, or open new facilities in the Eighth District, while a smaller number of manufacturers reported plans to reduce employment. Firms in automobile parts, consumer products, magazine, package, tubular products, coiled metal springs, machinery, steel, chemical, specialty chemical, and plastic products manufacturing plan to hire new employees and expand operations in the Eighth District. In contrast, firms in pharmaceutical products, shoes, food, and aircraft manufacturing reported plans to lay off workers in the District.
Reports of planned activity in the District’s service sector have also been positive since the previous report. Firms in distribution, logistics, telecommunication, online shopping, wealth management, transportation, and veterinarian services reported new hiring and expansion plans. In contrast, firms in healthcare services plan to lay off employees. Reports from contacts in the retail sector have been mostly positive, as contacts noted a number of major investment projects and expansions among retail stores and restaurants. In Louisville, contacts noted that retail stores appear to be performing well and new restaurants are opening regularly; contacts also indicate higher traffic at fast food restaurants. In St. Louis, contacts noted high foot traffic and sales at two new outlet malls.
Real Estate and Construction
Home sales have continued to increase throughout most of the Eighth District on a year-over-year basis. Compared with the same period in 2012, August 2013 year-to-date home sales were up 17 percent in Louisville, 19 percent in Little Rock, 10 percent in Memphis, and 8 percent in St. Louis. August 2013 year-to-date single-family housing permits increased in the majority of the District metro areas compared with the same period in 2012. Permits increased 8.2 percent in Louisville, 21 percent in Memphis, and 17 percent in St. Louis, but decreased 5 percent in Little Rock.
Commercial and industrial real estate market conditions have continued to improve throughout most of the District. Contacts in Little Rock reported decreased office vacancy rates and increased asking rents. A contact in St. Louis noted a rebound in the industrial real estate market, while a contact in Memphis reported a strengthened industrial real estate market. A contact in northwest Kentucky reported that commercial real estate activity is expected to increase by the end of 2013, while the industrial vacancy rate is expected to decline. Commercial and industrial construction activity also continued to improve throughout most of the District. A contact in central Kentucky noted increased commercial construction in Hardin County. A contact in northeast Arkansas reported that commercial development continued to be strong in northeast Jonesboro. Contacts in St. Louis reported plans for expansion of a manufacturing factory in southwest Missouri and industrial development in north St. Louis.
Banking and Finance
Total loans outstanding at a sample of small and midsized District banks decreased 1.1 percent from mid-June to mid-September. Real estate lending, which accounts for 72.9 percent of total loans, decreased 0.9 percent. Commercial and industrial loans, accounting for 15.7 percent of total loans, remained largely unchanged. Loans to individuals, accounting for 5 percent of total loans, increased 4.6 percent. All other loans, accounting for 6.4 percent of total loans, decreased 9.6 percent. During this period, total deposits at these banks remained largely unchanged.
Agriculture and Natural Resources
Crop conditions across the District remained relatively unchanged from our previous report. On average, 89 percent of the District states’ corn, cotton, sorghum, and soybean crops were rated in fair or better condition. Similarly, about 80 percent of the District states’ pastureland was rated in fair or better condition. Harvest progress in the District lagged behind the 5-year average for all five major crops. The District corn, cotton, and rice harvests were 19 percent, 14 percent, and 18 percent behind their five-year averages, respectively. The District sorghum and soybean crops fared slightly better at 9 percent and 8 percent behind their five-year averages, respectively. Year-to-date coal production in the District for August was about 3 percent higher compared with the same period in 2012. In contrast, coal production for August 2013 was about 1 percent lower than in August 2012.