December 5, 1984
Overview
There appears to be a lull in economic activity in the Tenth
District at this time. But retailers, including automobile dealers,
are mildly optimistic about sales for the rest of 1984. Inventories
are viewed as generally satisfactory by retailers and manufacturers.
Few price increases are expected for the rest of the year at either
the retail or the producer level. Housing starts and sales continue
above year-ago rates, while demand for mortgage funds is weak. Most
responding banks report no change in total loan demand, and some
growth in total deposits. Agricultural bankers expect unsatisfactory
progress in debt servicing by many farmers in 1985.
Retail Trade
Although most retailers report year-to-date sales have improved over
year-ago levels, results have been mixed in the past three months.
Stores with declines in sales in the past three months note some
recovery more recently. Clothing has been selling particularly well.
Inventory levels are slightly higher than some retailers desire, but
this comes at a time when retailers are trying to position
inventories for the holiday season. Retailers are mildly optimistic
about sales through the remainder of the year with "better than last
year" the predominantly expressed sentiment about this year's
Christmas sales. Prices have remained flat in recent months, and no
significant increases are expected for the remainder of the year.
Automobile Sales
Automobile dealers report sales are slightly ahead of year-ago
levels. Credit market conditions remain satisfactory, and financing
is available both for floor planning and new car sales. A number of
dealers describe inventories as tight, and the mix of inventories is
unsatisfactory with some of the 1985 models in short supply. Despite
this, dealers remain optimistic about sales for the remainder of the
1984 and early 1985.
Purchase Agents
Respondents report input price increases ranging from 2 to 7 percent
over the past year. Most have experienced smaller increases over the
recent three months, and few expect price hikes during the remainder
of 1984. Except for some difficulties with undependable suppliers,
most agents have had no problem getting deliveries and expect none
for the remainder of the year. Most respondents describe inventory
levels as satisfactory while they continue to look for ways to trim
further during the remainder of 1984.
Housing Activity and Finance
The majority of homebuilders report that housing starts are still
running ahead of last year. Most report substantial improvement in
multi-family starts, but only moderate increase in single-family
starts. Sales of new hones are at or above last year's rate. Prices
for new hones have remained constant or risen only slightly, and
inventories are generally low. Prices for building materials have
remained stable or risen slightly. No availability problems were
reported, nor are any expected. Demand for mortgage funds at savings
and loan associations is weak, especially for residential mortgages.
Mortgage commitments are thus being made at a slow pace. Mortgage
rates are expected to fall slightly, but no significant improvement
in mortgage demand is anticipated before early next year. Savings
inflows are reported to be somewhat higher than last year, with some
further improvement expected.
Banking
A majority of respondents at Tenth District banks report no change
in total loan demand during the last month. However, a sizable
minority indicate that loan demand was somewhat higher. The
situation is similar for commercial and industrial loans, and for
commercial real estate lending. Some respondents express continuing
concern about loan quality in industries such as energy and
agriculture. Most banks report an increase in consumer loans, but
lending for residential real estate is unchanged. A majority of
respondents experienced growth in total deposits. Demand deposits
and conventional NOW accounts showed little change, but most banks
registered increases in Super-NOW accounts and MMDA's. Large
certificates of deposit, passbook savings accounts, and small time
deposits were generally unchanged.
Agriculture
Banks in the Tenth District report a slight decline in interest
rates on operating loans for farmers, with current rates ranging
from 13.5 to 14.5 percent. The largest decrease was in New Mexico,
and some bankers in Missouri and Nebraska expect interest rates to
move lower yet. Despite slightly lower interest rates, paydowns on
operating loans at agricultural banks have been much slower than
expected throughout the Tenth District, with the exception of
Colorado. Agricultural bankers now expect many farmers to make
unsatisfactory progress in servicing their debts in 1985. Land
prices continue to decline, but very little land is currently
changing hands. Corn yields are reported above average, except in
Missouri where yields are sharply lower than normal due to a summer
drought. Soybean yields are generally reported below average.
Extensive total and partial liquidations of cow-calf herds by major
ranch operators are reported in Nebraska, Oklahoma, and Colorado.
Stocker cattle operators are reflecting guarded optimism about 1985
price prospects, however.