June 17, 1992
Overview
The Tenth District economy continues to grow slowly, led by consumer
spending and residential construction. Retail sales, including new
car purchases, continue to improve, and single-family home building
remains strong. Demand for most types of commercial bank loans rose
last month. But district energy activity remains depressed, and
lower livestock prices are restricting improvement in the farm
sector. Retail prices have been rising only slowly while prices for
manufacturers' inputs are generally stable.
Retail Sales
Retail sales improved slightly over the past month, and most
retailers expect this trend to continue for the rest of the year.
Retail prices in the district have been rising slowly. Over the rest
of the year, retailers expect only modest price increases because
value-oriented consumers will resist any large price gains. Most
retailers expect to expand their inventories later this year due to
rising sales.
Automobile sales over the last month improved in most parts of the district. Dealers and buyers are generally able to obtain financing. Most dealers are satisfied with their current inventory levels and are optimistic about sales prospects for the summer.
Manufacturing
Most purchasing agents report that input prices were stable over the
last month but are higher than a year ago. Input prices over the
next month are also expected to be steady. Most firms report no
problems with availability or lead times for their materials inputs,
nor do they report production bottlenecks or shortages of skilled
labor. Half of the respondents are satisfied with their inventory
levels, while the other half find their stocks somewhat heavy.
Energy
Energy activity in the district remains depressed despite some
recent increases in oil and natural gas prices. The average number
of operating drilling rigs in district states rose slightly to 192
in May from 188 in April. Nonetheless, the May rig count was about
15 percent below its year-ago level and still near the low levels
reached during the energy bust in 1986.
Housing
Housing starts in the district are substantially higher than a year
ago and generally up from a month ago. The improvement is
concentrated in the single-family sector, and most builders expect
further gains in single-family housing starts over the rest of the
year. New home sales are also up, and inventories are low. The
prices of new homes are higher than a year ago but unchanged over
the last month. The prices of many building materials, especially
lumber, continue to rise.
Mortgage demand is strong, even though mortgage refinancing has slowed somewhat. Mortgage demand is also likely to remain strong over the rest of the year, with mortgage rates expected to fluctuate in a narrow range.
Banking
Total loan demand rose at most reporting banks last month, pushing
loan-deposit ratios higher than last month and a year ago. Bankers
report generally higher demand for commercial and industrial loans,
consumer loans, home mortgages, and agricultural loans. Demand for
construction loans and commercial real estate loans at most banks
was unchanged.
Changes in total deposits were mixed last month, with slightly more banks reporting decreases than increases. Demand deposits rose at most banks. Changes in MMDAs were mixed, but NOW accounts, IRA and Keogh accounts, large CDs, and small time deposits were all constant to down.
Almost all respondents left their prime rates unchanged last month, while about half reduced their consumer lending rates. Nearly all banks expect these rates to stay unchanged in the near future. Lending standards were unchanged.
Agriculture
Crop conditions vary widely across the district. In parts of
Colorado, Kansas, and Nebraska, a recent cold snap may have reduced
winter wheat yields by nearly a third while slowing development of
the recently planted corn crop. In Oklahoma, however, the winter
wheat crop is in good condition and normal yields are expected. But
wet weather in the state has temporarily delayed the start of the
wheat harvest and the planting of the cotton crop.
District cattle feeders have trimmed inventories in expectation of falling cattle prices. As a result, most district feedlots are operating below capacity. Meanwhile, the recent expansion in district pork production appears to be slowing in response to low hog prices. Most large-scale pork producers are maintaining the size of their breeding herds, while some small-scale producers are dropping out of the industry.
Rural lenders report a modest pick-up in business activity in rural communities during the past year. While activity was up overall, main street merchants continue to struggle against increased competition from large retail chains.