October 23, 1991
Overview
Economic conditions in most of the Tenth District continue to show
only modest improvement. Retail sales and new home sales are up
somewhat. But new car sales are off slightly and housing starts are
sluggish. Drilling for oil and gas continues to slip and falling
cattle prices have slowed the growth of farm income. Both retailers
and manufacturers want to trim inventories and retail and wholesale
prices are generally steady to somewhat lower.
Retail Sales
Retail sales have increased somewhat across district states over the
past month. Clothing sales are strong, but sales of big ticket items
are weak. Some retailers expect relatively strong sales when the
holiday season arrives. Prices have been steady to somewhat lower
over the past month and are expected to remain steady. Strong
competition for the consumer's dollar appears to be keeping downward
pressure on prices. Most respondents consider their inventory levels
too high, but some expect to expand inventories mere than seasonally
as they stock up on spring goods.
Auto sales are down slightly from a month ago in most district states. Some potential buyers continue to have difficulty getting loans. Dealers are trimming their inventories of 1991 cars and expanding their new model inventory. Respondents expect auto sales to remain flat or improve slightly through the reminder of the year.
Manufacturing
Purchasing agents report few increases in input prices over the past
month, and expect little further change in prices this year.
Materials are readily available. Most firms are trying to trim
inventories, and expect to do so through year-end. A few plants are
working close to full capacity, but none report bottlenecks or
skilled labor shortages.
Energy
Activity in the district's oil patch continues to slow in response
to weak prices for natural gas and crude oil. The average number of
operating rigs in district states fell from 235 in August to 232 in
September. This dip caused the district rig count to fall about 24
percent below its year-earlier level.
Housing Activity and Finance
While housing starts over most of the district were down from last
month, starts are above year-ago levels and are expected to end 1991
ahead of last year. New home sales are up, helping to reduce the
inventory of unsold homes. Prices for new homes are also up
moderately. Builders report no problems acquiring materials, but
lumber prices remain high.
Most savings and loan respondents report net deposit outflows last month. Deposits are expected to remain flat or decrease in coming months. Mortgage demand varies widely across the district. Most respondents expect mortgage rates to soften slightly during the next several months.
Banking
Changes in loan demand were mixed at district commercial banks again
last month. Half the respondents report no change in overall loan
demand. The other half was split equally in reporting increases and
decreases in overall loan demand. Demand was lower for commercial
and industrial loans and most real estate loans, but higher for
agricultural loans. Demand for home mortgage and home equity loans
was constant to slightly higher. Loan-deposit ratios showed no
definite trend last month. Changes in total deposits were also
mixed. NOW accounts, MMDAs, and IRAs and Keoghs increased at some
banks, however.
Most respondents report decreases in their prime and consumer lending rates. Several of the respondents expect to lower these rates further in the near term. No banks report changes in other lending terms.
Agriculture
The fall harvest is underway in most of the district. Corn, soybean,
and milo yields vary widely. Dry weather cut dryland yields by more
than half in most areas, but irrigated crop yields are expected to
be better than average.
Unfavorable weather continues to plague district farmers and ranchers. Wet weather has delayed the cotton harvest in Oklahoma. But dry weather has slowed planting of the winter wheat crop in much of the district. Dry weather has also scorched district pastures, causing ranchers to feed previously harvested forages to their cattle. Forage supplies are generally adequate, however, because the spring hay crop was large in most areas.
District cattle ranchers and feeders continue to adjust to last summer's sharp drop in cattle prices. Prospects of further declines in feeder cattle prices have encouraged many ranchers to sell their calves instead of feeding them to heavier weights or retaining them for breeding herds. Meanwhile, operating losses have led feedlot operators to reduce the number of cattle on feed. These adjustments should trim the backlog of unusually heavy cattle that pushed cattle prices down, enabling gradual recovery in prices during the rest of the year. Still, cattle prices are likely to remain below the record levels of recent years, eroding the main source of strength in district farm incomes.