March 12, 1985
Overview
With the notable exception of agriculture, the Tenth District
economy continues to show modest improvement. Retail sales have
picked up somewhat recently, accompanied by stable prices. Inventory
levels are generally judged to be satisfactory. Housing starts are
slightly lower then high year-ago levels but well above 1983 levels.
Mortgage rates have shown little change recently and little change
is expected in the months ahead. Problems remain in the agricultural
sector, with 5 percent or somewhat less of farmers expected to be
forced out of farming this spring. Most lenders are wary of the
Farmers Home Administration (FmHA) program to restructure farm debt.
Loan demand at district banks is mixed, as is deposit behavior.
Retail Trade
Most retailers report that sales picked up recently. Sales have been
strongest in the area of women's wear. Retail prices have remained
stable in the past three months. More than half of the reporting
retailers are satisfied with current inventories and expect
inventories to expand later this year if sales strengthen. Prices
are expected to remain stable in the next six months, and sales are
expected either to remain flat or increase slightly above 1984
levels.
Automobile Dealers
Automobile dealers report sales ranging from slightly ahead to
slightly behind year-ago levels. Credit market conditions remain
relatively attractive, and financing is available both for floor
planning and new car sales. The inventory situation is mixed, with
some dealers satisfied while others are expanding. Despite recent
weakness in some areas, dealers are optimistic that 1985 sales will
prove even better than strong 1984 sales.
Purchasing Agents
Purchasing agents report that input price, remained fairly constant
during the last three months. Slight increases are expected in the
remainder of the year. Agents report no problems in obtaining
materials, and none are anticipated. Inventories are reported to be
at satisfactory levels, with no bottlenecks.
Housing Activity and Finance
Homebuilders report that housing starts are slightly lower than the
high year-ago level, although starts are well above 1983 levels.
Sales of new homes are about the same as year-ago levels, and new
home prices have remained stable. Savings and loans report that
mortgage loan demand is about the same as a year ago. Mortgage rates
have remained fairly stable so far in 1985, and few changes are
expected during the rest of the year. Savings inflows have also been
similar to last year, despite lower minimum deposit requirements on
MMDA's and Super NOW's.
Agriculture
Estimates of the proportion of farmers and ranchers who not receive
credit from their usual bank source this spring vary widely across
the district. Bankers in ranching areas report that practically all
of their customers continue creditworthy. In grain-producing areas,
most bankers report that 5 to 10 percent of their customers will not
receive bank credit for spring operating expenses, though estimates
are higher in some parts of the district, and as low as 2 to 3
percent in other parts. Some of these farmers will obtain credit
from the FmHA or from suppliers. Many farmers will leave farming
this spring, with the proportion estimated at 5 percent or somewhat
less.
The land market continues very soft, with very little land changing hands. Parts of Kansas, Nebraska, and Colorado report that about 15 to 20 percent of the land in the area is for sale. Parts of Wyoming and Colorado report much higher proportions of land for sale, though the proportion is affected by nonagricultural uses of the land. In Missouri and parts of Nebraska and New Mexico, very little land is actually listed for sale, though bankers indicate that this is probably due to a lack of buyers, not an unwillingness to sell.
Most bankers continue to be wary of the FmMA program to restructure farm debt because of bureaucratic procedures that slow loan guarantee approvals. Moreover, many loans require a significant interest rate reduction to achieve a break-even cash flow. Many bankers appear reluctant to lower rates enough to meet the requirements. Participation in the program is heaviest in Kansas and parts of Nebraska, Oklahoma, and Colorado. Some bankers continue to ignore the program completely.
Banking
Respondents at Tenth District banks give mixed reports on loan
demand. Roughly equal numbers of banks report increased, unchanged,
and decreased loan demand. Consumer loans have shown the greatest
tendency to rise, while residential and agricultural loans have
shown the greatest tendency to fall. Deposits also have displayed
mixed behavior across district banks. Super NOW accounts, MMDA's,
and IRA's have registered gains, while demand deposits and passbook
savings accounts have registered losses. The prime rate stands at
10.50 percent at a majority of the banks, down from 10.75 percent
last month. Consumer lending rates have either not changed or fallen
slightly. No further declines are expected. All institutions sampled
either have lowered or will soon lower the minimum deposit on MMDA's
and Super NOW's to the allowable $1,000. Lowering the minimum
deposit is viewed as necessary to match competitors but has not
generated any growth in deposits.