January 20, 1984
Overview
Economic activity in the Tenth District continues to show moderate
improvement following a strong Christmas sale season. New car sales
have increased somewhat in early January. Both retail inventories
and materials inventories are being closely controlled. Lead times
for materials inputs are beginning to increase. Housing sales slowed
late in 1983, and the demand for mortgage funds at savings and loan
associations is weak. Commercial and industrial loan demand has been
increasing at commercial banks, and deposit growth is strong. Tenth
District agriculture has apparently not suffered greatly from the
severe winter weather.
Retail Trade
Most retailers report current dollar sales in 1983 from 13 to 20
percent higher than in 1982. Christmas sales were unexpectedly
higher than in previous years for most retailers, although some
stores were hurt by December's bad weather. Sales are expected to
continue their growth in 1984. More than half of the respondents
began clearance sales earlier than in the past in order to reduce
inventories and retain competitive. Prices have been stable and are
expected to remain so in early 1984.
Automobile Sales
Most auto dealers surveyed report significant sales increases in the
first weeks of January compared to December's somewhat disappointing
performance, which some attribute to harsh weather. No problems in
obtaining financing for floor planning were reported. Loans are
available for potential buyers although some dealers have suffered
from reductions in low-cost captive financing. Inventories range
from constant to slightly expanded. All dealers surveyed were
optimistic about sales in 1984.
Purchasing Agents
Most purchasing agents contacted report steady to slightly
increasing input prices through 1983. Agents are expecting increases
in major input prices in the range of 3 to 9 percent in 1984.
Although few difficulties are being experienced in getting
materials, lead times have increased and are expected to increase
further. All respondents report inventory levels to be relatively
lean but satisfactory. Stocks are expected to remain at or slightly
above their current levels during 1984.
Housing Activity and Finance
Home builders report that housing starts in 1983 were way ahead of
the previous year, while sales of new houses were moderately higher.
A slight slowdown in sales was experienced in the last few weeks of
1983. Prices of new houses increased 3 to 5 percent in 1983.
Virtually all home builders surveyed report fairly tight inventories
of unsold houses.
Savings inflows at savings and loan associations are slightly higher than a year ago, but virtually all respondents report a weak demand for mortgage funds. Nearly all institutions surveyed indicate that. mortgage interest rates are holding steady and will continue to do so for the next few months.
Banking
Loan demand at Tenth District banks increased in December, with the
strongest growth in commercial and industrial loans. No declines
were reported in consumer, agricultural, or commercial real estate
loans, but a couple of institutions experienced declines in
residential real estate loans. Total deposits were up in almost all
surveyed banks. Virtually all categories of deposits increased or
remained the same, with demand deposit growth the strongest. The
prime rate ranged between 11 and 13.5 percent, with over 80 percent
of the banks charging 11 to 11.75 percent. None of the respondents
changed their prime rate last month and over 70 percent do not
expect a change to occur this month. Consumer lending rates were
also unchanged, and no change is expected this month.
Agriculture
Severe winter weather conditions in the Tenth District brought
minimal livestock death losses, but there has been an absence of
weight gains by feeder cattle in recent weeks. Although District
bankers expect the extreme cold to have little impact on marketing
of cattle, they are concerned about depleted stocks of hay in the
event of more severe weather. The winter wheat crop in the Tenth
District is in good condition with adequate snow cover apparently
protecting the wheat from freeze damage. Wind erosion, normally a
problem in parts of the District at this time of year, is virtually
nonexistent despite adverse weather conditions. Anticipated end-of-year loan paydowns by farmers did not materialize, with little if
any improvement expected in the near future. Bankers report some
refinancing of troubled loans while a few large farm bankruptcies
have occurred across the District. There has been some increase in
Farmers Home Administration emergency loan applications by banks'
farm customers, but processing delays prevent the assistance from
being readily available. Many farmers appear to be carrying large
stocks of corn in anticipation of price improvement. Sales of farm
machinery and equipment across the District have been flat with no
yearend upturn. Equipment manufacturers are not optimistic about
increased sales of farm machinery and equipment in 1984.