June 25, 1984
Overview
Some apparent slowing in economic activity is reported for the Tenth
District, with only moderate growth expected for the rest of the
year. While retail sales remain well above a year ago, gains have
been mixed in recent months. Few significant inventory adjustments
are expected in the months ahead, either for retail goods or
materials inputs. With few exceptions, materials art readily
available and lead times are stable. Price changes are expected to
be minimal for the rest of the year, both at retail and for inputs.
Housing starts are expected to be flat or down slightly through
yearend, with demand down slightly due to higher interest rates.
Loan demand at banks is slightly stronger than last month. A further
rise in the prime rate is anticipated but consumer lending rates are
expected to remain stable. Inadequate moisture last fall and too
much rain this spring have contributed to mixed crop conditions,
with row crop planting behind schedule. District bankers are
concerned about the increase in farm bankruptcies.
Purchasing Agents
About half of the purchasing agents contacted report that input
prices have increased 3 percent or less since June of last year.
Most of the remainder report increases of 5 or 6 percent. Few agents
have seen significant price increases during the last three months.
Input prices are expected to increase 4 to 6 percent during the
remainder of the year. Materials inventories are generally reported
to be at satisfactory levels. Inventory adjustment has been minimal
in recent weeks and no significant changes are expected for the
remainder of the year. With few exceptions, materials are readily
available, lead times are stable, and bottlenecks in labor and
capacity are not apparent.
Retail Trade
Retailers report that year-to-date sales are up some 10 to 20
percent over a year ago but that sales gains have been mixed in the
past three months. Men's and women's apparel have been selling
particularly well. Inventory levels are slightly high relative to
near-term sales expectations, but no significant trimming is planned
for the near future. Clearance sales are expected to follow a normal
pattern. Prices are reported to be generally flat and are expected
to remain so for the rest of the year.
Automobile Sales
Automobile dealers throughout the Tenth District report moderately
to strongly improved sales in 1984 relative to last year. Sales of
imports and large domestic cars have been particularly strong.
Several dealers are concerned about the recent rise in interest
rates, but all the dealers contacted report satisfactory credit
conditions. Financing is available for floorplanning and buyers can
get loans. Dealers have tried to expand their inventories but have
been frustrated by a lack of availability. The new import quotas
effective since April have provided little relief for the tight
import market. The outlook for both domestic and imports sales
through 1984 and into 1985 is still very good.
Housing Activity and Finance
Homebuilders report that housing starts thus far in 1984 have
exceeded year-ago levels, especially in the single- family category.
Starts are expected to remain steady or fall somewhat for the rest
of the year. Sales of new homes are below year-ago levels, and
prices have increased or remained steady. Homebuilders report that
materials are readily available at steady prices, except for
increases for sheetrock and cement. Savings inflows at savings and
loan associations are largely unchanged from last year and are
expected to remain steady through 1984. Mortgage demand has fallen
off in recent weeks because of rising interest rates. Steady or
increasing interest rates are anticipated through 1984.
Banking
Loan demand at Tenth District banks has increased slightly over the
past month, mostly due to increases in commercial and industrial
loans and consumer loans. Some respondents note that the demand for
auto loans is still quite strong. Residential and commercial real
estate loan activity is quite variable, with the average level of
loans unchanged. Agricultural loans decreased slightly. Total
deposits have risen at the respondent banks. There was an increase
in all types of deposits except for conventional NOW accounts, which
remained at the previous month's level, and passbook savings
accounts, which fell. The prime rate ranged between 12.5 percent and
14.0 percent, with over half of the banks charging 12.5 percent and
over 80 percent charging 13 percent or less. Although none of the
respondents reported a change in the prime rate in the last month,
all report an increase of at least 0.5 percent in the beginning of
May. Two-thirds of the respondents expect a further rise in the
prime, with the rest expecting no change. Consumer lending rates
have risen slightly, with 60 percent of the respondents reporting no
change. None of the respondents expect consumer lending rates to
change in the near term.
Agriculture
Crop conditions across the Tenth District are mixed. The winter
wheat crop is rated from average to good. Some areas of the District
received inadequate rainfall last fall, resulting in some wheat
acreage being replanted this spring to barley or soybeans.
Harvesting of wheat has begun in southern Oklahoma and will begin in
the northern half of the state in about a week. Wheat harvesting is
expected to begin in mid-July in the western part of the District.
Planting of row crops is behind normal in most of the District
because of heavy rainfall and some flooding. The corn crop is almost
completely planted. More soybeans than usual have been planted due
to a late spring and the plowing under of damaged wheat. District
bankers express concern over the increasing number of farm
bankruptcies that have occurred thus far this year and those
anticipated next year.