Beige Book Report: St Louis
June 23, 1987
Summary
The District's economy slowed in the most recent period as indicated
by employment and construction data. Dry agricultural conditions
have allowed rapid planting progress but threaten further crop
development.
Outlook
A recent survey of 261 small businesses in the Eighth District
suggests that respondents' expectations of economic conditions in
the near future were less optimistic than a year ago. Compared with
first quarter 1986 a smaller proportion felt general business
conditions would improve, that it was a good time to expand and that
their sales volume would increase in the near future.
Employment
Total District employment declined slightly in April, but a larger
decrease in the number looking for work allowed the region's
unemployment rate to fall slightly in April to 7.4 percent. District
nonfarm employment expanded at a 2.8 percent annual rate in the
three months through April. Although this pace approaches the
national average, it represents a considerable slowing from the last
report. Most of the slowdown was concentrated in manufacturing,
construction and the health and business services sector. Regional
manufacturing employment fell at a 1.4 percent rate in the February-
April period with mast major industries posting losses. Auto
assembly plants laid off workers in April and May, and temporary
shutdowns are planned for portions of June and July. In Missouri,
auto industry employment in April was a third lower than one year
earlier. District mining employment, concentrated in Kentucky coal
mining, fell in March and April after four successive months of
gains.
Construction and Real Estate
Construction slowed recently due to a sluggish residential sector.
The value of District residential contracts was up 2.1 percent
during the three months through April, trailing the nation's 6.4
percent growth. Permits for both multi- and single-family dwellings
dropped in April after first quarter gains.
New home sales jumped in April as buyers attempted to close deals before anticipated higher mortgage rates. In St. Louis and Memphis, sales were strong in April, but were expected to flatten in May. Single-family starts in Louisville were more than 30 percent above year-ago levels in April and May, although one real estate contact expects slowing in future months.
District nonresidential construction accelerated in recent months; nonresidential contracts issued in the three months through April grew 15.3 percent, outpacing the nation's 7.2 percent expansion. Extremely rapid growth in Arkansas offset declines in Tennessee.
Banking
A recent survey of the largest District banks indicated a slowing in
participations and sales of commercial and industrial (C&I) loans.
All of the respondents indicated a slackening in the demand for C&I
loans and as a result, are reducing their involvement in sales and
participations in order to build their own portfolio. Most
respondents emphasized sales and participations were viewed as a
Most of the loans sold or participated were sold to affiliate banks or U.S.-chartered banks with assets greater than $1 billion. The average maturity of these loan participations is approximately one year. District banks typically average a spread of 50 to 100 basis points as the "lead" bank in a participation transaction.
Agriculture
Current weather conditions are a source of both good and bad news.
Due to dry weather, planting progress on all major District crops is
well ahead of average. To date, crop development has been favorable.
The bad news is that the dry spring leaves crops vulnerable to
damage during the normally dry months of July and August. Most
states report that wheat yields will be reduced by as much as 20
percent due to the dry spring.
The volume of farm products shipped on the middle Mississippi River in the first four months of this year was 19 percent above the level of the same period last year.