September 16, 1984
Overview
Some further moderation is apparent in Tenth District economic
activity. While retail sales are expected to improve further,
housing activity and mortgage demand are generally slowing.
Inventories of both retail goods and materials inputs are at
satisfactory levels. Price increases have been small, and are
expected to continue so. Total loan demand at district banks remains
relatively constant while deposits are higher. Fall crops in most
district states are suffering from dry weather.
Retail Trade
Retailers report year-to-date sales up as much as 10 percent over a
year ago. Sales have generally improved in the last three months,
with apparel and accessories selling particularly well. Stronger
sales are expected for the rest of the year. Retailers seem
satisfied with inventory levels and plan no changes in the near
future. Prices have generally been flat in the last three months,
with some price declines reported.
Automobile Sales
Automobile dealers throughout the Tenth District continue to report
improved auto sales compared to a year ago. Credit market conditions
are satisfactory and financing is available both for floorplanning
and customer purchases. Dealers in some areas report that only lack
of availability is constraining sales. Dealers are optimistic about
sales for the rest of 1984 and early 1985. Their only concern is
over possible supply interruptions due to a strike.
Purchasing Agents
Purchasing agents generally report input prices from 2 percent to 10
percent higher than a year ago. Most respondents had either
unchanged prices or quite small price rises in the past three months
and virtually all expect steady input prices for the balance of
1984. Some firms are experiencing slight increases in lead times for
materials, but no materials availability problems are reported and
none are anticipated through 1984. Most respondents report
satisfactory materials inventory levels, with several having trimmed
inventories recently because actual sales are running below
forecasted sales.
Housing Activity and Finance
Residential construction activity in the district is mixed both by
type of structure and by location. Starts of single-family units are
generally down, particularly since June. Starts in multi-family
units range from below year-ago levels to considerably higher.
Overbuilding of multi-family units is reported in some areas such as
Colorado Springs and Oklahoma City. Housing starts are expected to
slow through year-end if interest rates remain at, or rise above,
their current level. Sales of new homes are generally down from last
year, with much of the slowdown occurring since June. Inventory
levels range from satisfactory to larger than desired. New house
prices are stable. Building materials are in good supply and are
expected to remain so. Prices for materials are generally steady,
although sheet rock prices are still rising in some areas.
Demand for mortgage funds and mortgage commitments at savings and loan associations is slowing from a generally robust Spring due mainly to the sizable increase in both fixed and adjustable mortgage rates over the past several months. Most respondents expect mortgage demand to continue decreasing, although rates are expected to be stable or down slightly. Savings inflows are higher than last year, but respondents generally anticipate a zero inflow or net outflow over the remainder of 1984.
Banking
Total loan demand was generally constant over the last month at
Tenth District banks, although real estate and consumer loans rose
slightly. Commercial real estate loans were slightly stronger than
residential loans. Some respondents report difficulty in competing
with finance companies on consumer loans. Commercial and industrial
and agricultural loans were flat. Total deposits were higher, mostly
due to increases in Super NOW, MMDA, and IRA and Keogh accounts.
Conventional NOW accounts rose slightly. Demand deposits were flat,
while large CD's and passbook savings accounts declined. Almost all
respondents report no change in their prime rate in the last month,
and the majority do not foresee a change in the near future.
Consumer lending rates were unchanged at most of the banks surveyed,
with the rest reporting higher rates. None of the respondents expect
further changes in the near future.
Agriculture
Dry conditions in several district states will affect production and
yields of fall-harvested crops. In Missouri, where spring flooding
prevented timely planting, lack of moisture and hot weather have cut
expected crop yields. Corn yields are expected to be halved and
soybean yields will also be substantially reduced. In Kansas,
dryland milo production is well below average and rain is needed to
prepare the fields for winter wheat planting this fall. Irrigated
crops in the state are doing well, however, especially irrigated
corn. Cotton yields in Oklahoma will be well below normal, and rain
is also needed there for preparing winter wheat ground. Nebraska and
Colorado are not as dry as the other states. Their corn crops are in
good shape, as are soybeans in Nebraska. In general, Nebraska and
Colorado crop production has been very good this year. Livestock
production has not suffered as much as crops from dry conditions,
nor has marketing of cattle been affected by the weather. Colorado,
parts of Kansas, and Nebraska have abundant feed, both in pastures
and hay. In Missouri and parts of Oklahoma and Kansas, however,
rangeland is dry and cattle weight gains have been slower than
normal. Bankers expect below-normal paydowns on their agricultural
loans by the end of the year, and some expect more problems with
agricultural loans this year than last year.