October 23, 1985
Economic activity in the Tenth District is improving somewhat, apart from the weak farm sector. Retail sales are growing, with new car sales especially strong. Prices at retail and for factory inputs are generally stable. Inventories of industrial materials and retail goods are generally viewed as satisfactory. Residential construction activity varies widely across the district. Inflows to thrifts are increasing, with mortgage demand mixed to slightly higher. Loan demand at commercial banks is off slightly and deposits have increased slightly.
Retail trade
Retailers report a slight increase in sales this year over last
year, and sales have been improving in the past three months.
Clothing sales have been strong while home furnishing sales have
been weak. Sales are expected to increase seasonally with the coming
holidays. Prices are stable and are expected to remain so through
year-end. Retailers have been trimming inventories but expect to add
stocks in anticipation of seasonal sales increases.
Automobile sales
Automobile dealers report strong sales and large reductions in
inventories of 1985 models, due largely to financing incentives.
Inventories of 1986 models are beginning to grow. Some dealers are
apprehensive about sales following the end of the interest rate
incentive programs, but generally express optimism for 1986 model
year sales.
Purchasing agents
Most purchasing agents report that input prices have remained nearly
constant from a year ago and 3 months ago, and they generally expect
input prices to remain constant through the end of the year. Few
difficulties in obtaining materials are reported, and few new
problems are expected to arise. Most firms report either that
materials inventories are satisfactory or that they are reducing
stocks. Changes are not expected to be large for the rest of the
year.
Housing activity and finance
Homebuilders report that starts of single family houses have
remained flat, but give mixed reports. about multi-family housing
starts. Most area housebuilders expect starts for the remainder of
the year to follow current trends. Sales of new homes, prices of new
homes, and the inventory of unsold homes vary widely across
reporting areas. Prices of materials are generally steady and
material availability is good.
Most savings and loan associations report a significant increase in savings inflows relative to last year. Several institutions reporting strong inflows also report aggressive campaigns to attract funds. Each respondent expects the current trend to continue. Respondents also report mixed to slightly higher mortgage demand and commitments. Somewhat lower demand is expected as winter approaches. Mortgage rates are constant and are expected to remain so. Most institutions have not reduced to $1000 their minimum deposit on money market deposit accounts, Super NOW accounts, and 7-31 day certificates of deposit. Those that have reduced their minimum deposit believe that deposits have grown as a result.
Banking
Respondents at Tenth District banks report loan demand has fallen
slightly while deposits have risen slightly, on average, in the last
month. Commercial and industrial loans and residential and
commercial real estate loans fell slightly. Agricultural loans fell
more sharply. Consumer loans, on the other hand, increased. The
prime rate remained unchanged at nearly all of the banks surveyed.
No change in the prime is expected in the near term. A majority of
respondents report lower consumer lending rates. Although some
respondents expect further easing in these rates, most report they
did not anticipate any near term change. Deposits were slightly
higher, on average, during the last month. Demand deposits,
conventional NOW accounts, Super-NOW accounts, IRA and Keogh
accounts, and small time deposits increased slightly. Money market
deposit accounts and large CD's showed greater increases. Passbook
savings accounts were down slightly.
Agriculture
Most areas in the district have more farm land on the market this
fall, but very little appears to be changing hands. Farm land values
continue to drift lower reflecting the weak farm economy. Some of
the increased amount of land for sale results from higher
foreclosure rates. Many lenders believe farm business failures will
continue to run well above normal over the next six months. Bankers
report that Farm Credit System outlets are adhering to fairly strict
loan review guidelines, apparently leading to the sale of more farm
assets.
Fall grain harvest is underway in the district following a good wheat harvest. District farmers expect excellent corn, milo, and soybean yields. Nearly all farmers who are eligible are choosing to store their grain under Commodity Credit Corporation loans. In some areas, however, the number of farmers selling grain on the cash market is up somewhat from last fall. Though not a preferred option because of depressed grain prices, some farmers are pressed for cash to pay outstanding loans.
Winter wheat is being seeded in the district, though planting is behind in some areas due to wet weather. In general, district wheat growers are not having serious problems obtaining credit, although conditions are somewhat tighter than a year ago. A higher percentage of growers in Oklahoma and Missouri are having problems than in other district states. In most cases, input suppliers are unwilling to provide inputs on credit.