August 6, 1984
Overview
Economic activity in the Tenth District continues to grow
moderately. and price increases are expected to be relatively small
for the rest of the year. Inventories of input materials are
satisfactory but retail inventories are somewhat high. No major
inventory adjustments are anticipated, however. Higher interest
rates are restraining mortgage commitments, as well as housing
starts and sales. Automobile dealers are also concerned about the
impact of rising rates on new car sales. Loan demand has increased
somewhat at commercial banks, in spite of increases in the prime
rate and in consumer loan rates. The district wheat crop was
generally good, and fall-harvested crops are also in good condition.
Retail Trade
Retailers report that year-to-date sales are slightly ahead of a
year ago, but results for the last three months are mixed. Sales of
home furnishings and mens and women's apparel have been particularly
strong. Inventories are generally reported to be somewhat high, but
little adjustment is anticipated in the near future. Clearance sales
are occurring on schedule. Retail prices have remained approximately
constant during the last three months and are not expected to change
significantly before the first of the year. Expectations of sales
for the remainder of the year are mixed, but no large changes from
current rates are predicted.
Automobile Sales
Automobile dealers throughout the Tenth District continue to report
improved sales in 1984 relative to 1983. Credit market conditions
are satisfactory and financing is available for both floorplanning
and customer purchases. Host dealers express concern over rising
interest rates, indicating that further rate increases would
restrict sales. Attempts to expand inventories have been frustrated
by a lack of availability, with highly demanded models in short
supply. Dealers anticipate strong sales for the balance of 1964.
Purchasing Agents
Over half of the purchasing agents contacted report input price
increases over the past year ranging from 1 to 8 percent. Increases
were concentrated in the second quarter of this year. Expectations
of price movements for the remainder of 1984 vary by industry, with
stable or falling prices expected by several soft goods producers.
Some respondents report difficulties in getting materials because of
strikes at suppliers and heavy demands placed on suppliers by the
automobile industry. Most respondents are satisfied with their
materials inventory levels, having slightly trimmed or maintained
these inventories recently. Most intend to maintain or slightly trim
inventories the rest of the year. None of the respondents report
bottlenecks in skilled labor or plant capacity.
Housing Activity and Finance
Homebuilders in the Tenth District report mixed results when housing
starts in the first half of 1984 are compared to year-ago levels.
Starts of multi-family units are generally up, while starts of
single family units vary across the district. Higher interest rates
have slowed housing starts since early June and are expected to
continue to do so through the remainder of the year. Sales of new
homes are down from last year, with prices holding steady to
slightly higher. Inventories of unsold homes vary considerably
across the district. Building materials are in good supply at
generally steady prices. Savings inflows at savings and loan
associations are unchanged to slightly higher than a year ago, and
are expected to remain steady throughout 1984. Mortgage demand has
declined due to higher interest rates and is expected to soften
further for the rest of the year. Fewer mortgage commitments are
being made. Mortgage rates are expected to rise somewhat more in
1984.
Banking
Loan demand was moderately higher than last month at most Tenth
District banks. At all of the banks surveyed, commercial and
industrial loans and consumer loans were either flat or up slightly,
while agriculture loans were either flat or down slightly.
Residential and commercial real estate lending was considerably more
variable, rising sharply at some respondents but falling or
remaining unchanged at others. Total deposits were higher than last
month at a narrow majority of the respondents. Most of the increases
were in conventional NOW's, Super NOW's, and MMDA's, but some
respondents reported weakness in these categories. The prime rate
was 13 percent at most of the banks surveyed, up a half point over
the previous month. Consumer lending rates were slightly higher at
about half of the respondent banks and unchanged at the other half.
Several respondents expect to raise their consumer lending rates in
the near future.
Agriculture
The wheat crop in the Tenth District is generally good this year.
Most wheat has been harvested, though rain has delayed cutting in
Colorado. New Mexico and parts of Colorado report excellent crops,
but production is lower than normal in Nebraska and dry conditions
lowered production in parts of Oklahoma. Some farmers have sold
enough wheat to cover immediate expenses, but are holding the rest
of the crop. Producers are selling more wheat in Oklahoma, Missouri,
and Nebraska than in other district states. Although some producers
are actively selling harvested crops forward, there is not much use
of forward selling or futures. The district's corn and milo crops
are in generally good condition, though slightly behind in
development. There are reports of localized hail damage, some of it
heavy. The soybean crop is also in good condition but it, too, lags
normal development. Moisture conditions are good to excellent in New
Mexico, Colorado, and parts of Nebraska. The rest of the district
reports dry conditions and some concern about the lack of rain. At
the same time, land that was flooded earlier this spring did not dry
out enough to be replanted, except in isolated higher areas.