August 7, 1991
Overview
Economic conditions in the Tenth District appear to be improving
modestly. Supporting growth in the district are steady to slightly
higher retail sales, increasing new home sales, continued strength
in the livestock sector, and increased drilling for oil and gas.
Further momentum is expected from increases in housing starts and
auto sales in the last half of the year. Neither retailers nor
manufacturers are adding to inventories, and both retail and
wholesale prices are generally holding steady.
Retail Sales
Retailers report steady to somewhat higher sales over the last three
months. Clothing and seasonal merchandise sales are strong, although
home furnishings sales remain sluggish. Retailers generally expect
strengthening sales over the last half of the year. Prices have been
steady to somewhat lower over the past three months and are expected
to remain steady. Most retailers are satisfied with their current
inventory levels.
Auto sales are mixed across district states. Some potential buyers have to shop around to get loans, but adequate financing is available for dealer inventories. Dealers are striving for lean inventories even though sales are expected to increase in the second half of the year.
Manufacturing
Purchasing agents report steady to slightly lower input prices
compared with three months ago. Input prices are generally expected
to remain stable over the next three months. Materials are readily
available, with no problems expected for the rest of the year. Most
firms are maintaining or reducing inventories. Some plants are
increasing operations but are not putting pressure on either labor
supplies or plant capacity.
Energy
Energy activity in the district has edged upward in recent weeks in
response to modestly higher oil prices. The average number of
operating drilling rigs in district states increased from 230 in
June to 243 in the first three weeks of July. Despite this
improvement in drilling activity, the district rig count remained
about 20 percent below its year-ago level. Moreover, weak prices for
their products have discouraged producers of natural gas and sour
crude oil (especially abundant in Wyoming).
Housing Activity and Finance
New home sales are generally steady to slightly higher, but housing
starts across the district are mixed. With sales expected to be
steady to slightly higher in the months ahead, a declining inventory
of unsold homes is likely to encourage further gains in starts later
this year. Builders report no problems acquiring materials, although
lumber prices have been climbing.
Most savings and loan respondents report increased net deposit inflows last month. Respondents expect inflows to continue in coming months. Mortgage demand and commitments are stable, although respondents expect somewhat stronger demand for housing finance later in the year. Mortgage rates have stabilized and are expected to fluctuate in a narrow range for the rest of the year.
Banking
Changes in loan demand were mixed at district commercial banks last
month. Demand for consumer loans at most banks was stable to up
slightly, while demand for home mortgages was generally stable.
Demand for commercial and industrial loans and commercial real
estate loans varied widely. Most banks report declines in their
loan-deposit ratios. Total deposits were generally stable or up
slightly, with demand deposits accounting for most of the strength.
None of the respondent banks changed its prime rate last month, or expect to change it in the near future. Consumer lending rates were generally unchanged, although several respondents had reduced their rates. No banks report changes in other lending terms.
Agriculture
The cattle industry remains a major source of strength in the
district farm economy. A combination of low feed costs and high
feeder cattle prices have boosted profits for district cattle
ranchers. Pastures and rangelands are generally in good shape,
providing abundant, low-cost forage for cattle herds. Despite strong
profits, ranchers are expanding their herds cautiously. High feeder
cattle prices and a sharp decline in fed cattle prices have squeezed
profits for district cattle feeders. While an unusually large number
of cattle on feed has pushed fed cattle prices down in recent weeks,
prices are expected to rebound later in the year.
The winter wheat harvest is complete in all district states except Wyoming. Overall, the district's crop is about a fourth smaller than last year's bumper crop, due to smaller planted acreage and lower yields. Yields vary from 20 percent above normal in southwestern Oklahoma to 30 to 50 percent below normal in parts of Missouri and Nebraska.
Reduced production of spring-planted crops is also possible. The district's corn, soybean, and milo crops got a strong start due to plentiful spring rains, but more rain is needed now. If the recent hot, dry weather continues, crop yields could be sharply reduced.