Beige Book Report: St Louis
May 3, 1989
Summary
Most sectors of the Eighth District economy continued to improve;
however, there are many signs of weakness. Employment rose in all
sectors except government and construction. While manufacturing
employment rose, recent sales declines of autos and appliances have
led to layoffs. District utility companies report increased usage of
electricity. Nonresidential construction activity strengthened
recently, but home construction and sales remain weak. Across
virtually every loan category, except agricultural, first quarter
loan volume is well behind that reported a year earlier.
Employment
District employment rose rapidly in recent months, continuing the
strong growth that began last October. Payroll employment in the
three months through February grew at a 6.3 percent annual rate, led
by double-digit gains in the services, the transportation and
communications and the manufacturing sectors. On the other hand,
construction employment fell at an 8.2 percent rate in the same
period, due to sharp declines in Missouri and Tennessee.
Implementation of the military base realignment and closure plan recently approved by the House of Representatives would result in additional jobs at three bases within District boundaries but would cause the eventual closing of a Army ammunition testing facility in southern Indiana, eliminating 400 jobs.
Manufacturing
Manufacturing employment rose at a 10.8 percent rate in the
December-February period with all major industries except electrical
equipment producers experiencing gains. The chemicals and
transportation equipment sectors posted the sharpest job growth. A
St. Louis auto assembly plant temporarily laid off workers for one
week in March to reduce auto inventories. Weak refrigerator sales
prompted an Arkansas appliance producer to plan layoffs of 200
workers before May 1.
Transportation and Utilities
During the first quarter, District airports experienced flat or
declining passenger travel and cargo shipments compared to a year
ago. Barge traffic on the Mississippi and Missouri rivers is near
normal despite river levels remaining two to three feet below
normal. District utility companies reported that increases in
industrial demand for electricity ranged from 0.7 percent to 7.5
percent during the first quarter when compared to the same period a
year ago, while increases in commercial demand for electricity
ranged from 2.7 percent to 4.7 percent.
Construction
The value of District nonresidential construction contracts rose
23.9 percent in the three months through February, compared to the
three month average ending in November. The value of residential
contracts rose moderately during the recent period, but are no
higher than a year earlier. In the St. Louis area, first quarter
housing permits were down 31.8 percent from a year earlier. A number
of "move-up" buyers were prevented from ordering new homes as they
were unable to sell their existing homes at their desired prices.
Consumer Spending
Retail sales of general merchandise have been moderately strong in
March and early April in most areas of the District. In Arkansas and
Memphis, however, wet and cool weather has hampered sales,
particularly of summer clothes and merchandise. Generally, sales
have met retailer's expectations, resulting in satisfactory levels
of inventories. Sales of shoes, jewelry, and women's apparel have
sold particularly well.
Agriculture
Consistent with farmers' intentions to expand planted acreage,
operating loans this spring are considerably higher than a year
earlier. April rains have helped drought-stressed wheat crops in
northeastern Missouri and yields could be near normal. A heavy
freeze in southern District states has damaged fruit and vegetable
crops, with peach and fresh tomato growers experiencing the most
damage. Consumers will only see small price increases, if any, due
to the freeze, as the damaged areas produce less than 2 percent of
the nation's peaches, and less than 5 percent of the nation's fresh
tomatoes.
Banking
Total loans outstanding at the 12 largest District banks declined at
a 0.7 percent annual rate in the first quarter, a sharp drop from
the 5.9 percent rate of increase for the same period in 1988.
Commercial loans fell at a 3.5 percent annual rate in the first
quarter compared with a 15.5 percent rate of increase for same
period last year. Consumer loan volume, which had shown some signs
of strength earlier in the year, returned to its sluggish pattern.
Real estate lending, spurred by home equity financing, grew at a
13.6 percent rate for the first quarter, slightly less than the rate
a year earlier.