July 1, 1983
Overview
Business activity in the Tenth District continues to strengthen.
Growing sales are expected to bring moderate additions to retail
inventories, but materials inventories are expected to stay near
current levels. Small but broad-based increases in auto sales are
expected to continue. The winter wheat crop is in excellent
condition as harvesting begins in Oklahoma. Farmland values are
stabilizing after recent declines. Loan demand at Tenth District
banks is showing very little growth, and deposit growth remains
limited primarily to money market deposit accounts. The prime rate
remains generally stable, and no change is anticipated in the near
term.
Retail Trade
Respondents report nominal sales gains of up to 10 percent in the
first five months of 1983 compared with the same period of 1982,
with most responses falling in the 5 to 10 percent growth range.
Sales in all product lines have been growing steadily, with sales of
women's apparel particularly strong. Most retailers indicate that
inventory levels are satisfactory although about one-third of
respondents are still reducing stocks. For the remainder of 1983,
retailers throughout the Tenth District expect a continued steady
growth in sales that would prompt about a 5 percent expansion in
inventories by yearend.
Purchasing Agents
Prices of major inputs are currently 3 to 5 percent higher than in
June of last year, according to purchasing agents contacted, with
virtually all of the increase in the past three months. For 1983 as
a whole, agents foresee prices rising 3 to 6 percent. Purchasing
agents report attempts to manage inventories extremely closely in
the recovery. Thus, over the course of the year, they intend either
to trim inventories or to maintain them at current low levels. At
the present time, inputs are readily available, lead times are
short, and there are no reported bottlenecks of either labor or
capacity.
Automobile Dealers
Most respondents report a small but broad-based increase in auto
sales compared with sales in the same period of last year. The
growth in auto sales is attributed to low interest rates offered by
manufacturers' finance companies. While some dealers report lower-than-desired inventories due to difficulties in obtaining large
cars, most stated that inventories are being held constant or
trimmed slightly in preparation for the new model year. For the rest
of the year, auto dealers expect continued moderate growth in sales.
Agriculture
The winter wheat crop throughout the Tenth District is in excellent
condition, as a result of early spring rains. Harvest is starting
this week in parts of Oklahoma. District bankers report that the
majority of wheat farmers plan to remain in the PIK (Payment-In-Kind) program. The planting of row crops is slightly behind normal
but the recent dry weather has aided planting progress. Range
conditions have also benefited from adequate moisture and are
reported excellent for livestock pasturing. Many cattle that have
been grazing on PIK acres have gone to market after attaining
desired weight, while the rest have moved to grass pasture where
available or to feedlots. According to District bankers, farmland
values appear to be stabilizing after declining for two consecutive
years. Not much land is selling, but almost all of the land that is
changing hands is being purchased by farmers. Outside investor
activity in land sales is currently reported to be minimal. Farm
implement dealers are faring poorly with sales similar to 1982's
depressed levels. Sales of large items such as tractors and combines
have been particularly depressed. Tenth District bankers expect
little increase in sales before the end of the year.
Banking
Loan demand at Tenth District banks has shown very little growth
during the last month. A number of respondents report that real
estate lending has increased, and a smaller number report an
increase in consumer loan activity. Commercial and industrial loan
demand as well as agricultural loan demand remain constant. Most
respondents report deposit growth. Demand deposits, conventional NOW
accounts, and Super-NOW accounts have shown no growth, on average.
Continued steady growth of money market deposit accounts (MMDA's)
was reported, with most of these funds coming from outside the
reporting institutions. Reported growth in money market
certificates, small saver certificates, and large CD's is quite
variable but, on average, unchanged. With few exceptions, the prime
rate of responding institutions was 10.5 percent for the past two
months. No change in the prime rate is anticipated. Automobile loan
rates have declined within the last month at a number of respondent
institutions. Otherwise, consumer rates show little change, and
little change is anticipated during the next month.