August 5, 1992
Overview
Economic growth in the Tenth District appears to have slackened
recently. Retail sales are sluggish to moderately improved, with new
car sales holding steady. Housing starts are steady to slightly
lower, despite lower mortgage rates. Farm income prospects are
lackluster, and energy activity has weakened further, Prices have
been rising only slowly, both at retail and for manufacturers'
inputs.
Retail Sales
While some retailers report a moderate improvement in sales over the
last month, others say that sales remain sluggish. Sales of apparel
and home furnishings, however, are strong for many retailers. Retail
price increases have moderated due to the sluggish economy and
intense competitive pressures. Most retailers expect to post small
price increases, if any, for the rest of the year. Retailers are
maintaining current inventory levels because sales are expected to
improve later in the year.
Automobile sales over the last month were steady in most parts of the district. Despite some reports of credit constraints, financing is generally available for both dealer inventories and new buyers. Most dealers are optimistic about future automobile sales and are reasonably satisfied with current inventory levels.
Manufacturing
Most purchasing agents report that input prices were steady to
slightly higher over the last month, and should remain stable over
the next month. No firms report any significant difficulties in
obtaining materials, and several firms are experiencing shorter lead
times for supplier deliveries. Although few firms express much
dissatisfaction with current inventory levels, most plan to reduce
their stocks somewhat further. Recent export performance has been
mixed, but most firms expect stronger exports over the next three
months.
Energy
District energy activity remains near the low levels reached during
the l986 energy bust. The average number of operating drilling rigs
in district states fell from 192 in May to 187 in June, pushing the
June rig count nearly 20 percent below its year-ago level.
Housing
Housing starts remain significantly higher than a year ago, but are
steady to slightly lower over the last month. Builders expect starts
to remain steady for the rest of the year. Mortgage demand is
picking up again in response to lower mortgage rates, with much of
the pick-up due to refinancings. Respondents expect mortgage rates
to be steady and demand relatively strong over the next few months.
The inventory of unsold homes is lower than a year ago. The prices
of most building materials have risen gradually except for lumber,
which has jumped sharply over the last year. Higher lumber prices
and stronger housing demand contributed to rising home prices in the
district over the last year.
Banking
Loan demand rose at most reporting banks last month, while loan-
deposit ratios were virtually unchanged. Most banks report higher
demand for commercial and industrial loans, consumer loans, and home
mortgages. Demand for residential construction loans was mixed, and
flat or down for commercial real estate loans and agricultural
loans.
All respondents lowered their prime rate half a percentage point last month and reduced their consumer lending rates. All banks expect their prime rates to remain unchanged in the near future, and most banks foresee no further change in their consumer lending rates. Lending standards were unchanged.
Changes in total deposits were mixed last month, with slightly more banks reporting increases than decreases. Demand deposits rose at most banks, while large CDs fell. Changes in NOW accounts, MMDAs, and small time deposits were mixed, and IRA and Keogh accounts were flat. All banks reported reducing their deposit rates along with their lending rates.
Agriculture
Crop conditions across the district vary widely. The district's
winter wheat harvest is almost complete in Oklahoma, Kansas, and
Missouri but just beginning in Wyoming, Colorado, and Nebraska.
Overall, an average-sized wheat crop in the district is expected.
Plentiful rainfall boosted yields above normal in central Oklahoma,
but an early-summer cold snap and an extensive hail storm trimmed
yields in parts of Kansas and Nebraska. Meanwhile, growing
conditions have recently improved for the district's corn, soybean,
and milo crops, although cold, wet weather slowed the early
development of the crops.
The district's cattle breeding herd continues to expand slowly, with most district ranchers just maintaining the size of their herds. But despite a widely expected decline in cattle prices later this year, some ranchers are taking advantage of excellent pasture conditions to expand herds.
District agricultural bankers report no increase in farm loan demand, even with falling interest rates. Many farmers may be reluctant to take on new debt in a year when prospects for farm income are lackluster. Weak prospects for farm income are also restraining sales of farm equipment.