August 5, 1992
Summary
Overall, District economic activity continues to increase slowly.
Manufacturing reports are mixed, while nonmanufacturing reports
indicate continued growth. Increased government regulation is
reported to be hampering small business activity throughout the
District. Construction activity has slowed relative to the beginning
of the year, and real estate loan demand has declined recently.
Reports of demand for other consumer and business loans, however,
are mixed. District crops are, for the most part, in good condition
because of recent rains.
Manufacturing
District manufacturing reports indicate little change in employment
overall as some firms report expansions and growth, while others
report layoffs and relocations. For example, an apparel manufacturer
will begin renovating an old food-processing plant in Greenville,
Mississippi, this fall, hiring 1,000 people upon its completion next
year, while a furniture maker in Mississippi is expanding capacity,
adding 125 employees. In addition, a Michigan-based maker of
automobile seat covers expects to employ up to 400 people by January
at its new plant in Kentucky.
Offsetting these gains, a St. Louis-based defense contractor, who has been reducing employment for almost two years, laid off an additional 222 people. An automaker announced that 500 will be laid off at its St. Louis plant this fall as it decreases production. A steel manufacturer will eliminate 150 jobs when it closes an Illinois mill next year to move production outside the District. In addition, a Louisville clock maker, employing 185, closed.
Nonmanufacturing
District nonmanufacturing firms continue to show employment growth.
For example, a major retailer plans to add 400 employees at its St.
Louis operation before the end of the year, while a motor freight
company will employ about 150 workers in Memphis this fall after
relocating its southern Mississippi hub. A telecommunications
company in Memphis added an additional 100 employees because of
expansion. The St. Louis health services industry added 500 jobs in
May, bringing the industry's total increase over last year to almost
4,000 jobs. On the other hand, a major bank that has already been
reducing its regional workforce decided to close its Missouri
operation next year to consolidate in Delaware because of that
state's more favorable banking and insurance laws. Small-business
contacts throughout the District report that increased government
regulations have hampered growth and driven up business costs.
Construction and Real Estate
District construction activity has slowed from its early 1992 pace.
Several contacts report that the recent level of single-family home
permits is on par with its year-ago level; this contrasts sharply
with early 1992, when the level of permits was up substantially from
one year ago. Contacts are divided, however, about whether the
recent slowdown is a "temporary lull" or whether it indicates that
pent-up housing demand has been satisfied.
Banking and Finance
Recent balance sheet data from two samples of District banks give
conflicting signals as to the direction of loan demand. Total loans
outstanding at large District banks increased more in May and June
(0.5 percent) than they had during the previous two months (0.1
percent). This turnaround is attributable to strength in business
loans, which rose 0.6 percent over the period, compared with a 0.9
percent decline over the prior two months. Consumer loan demand, on
the other hand, has weakened, with loans outstanding declining 0.6
percent in May and June after a 2 percent increase in March and
April.
Loans outstanding at a group of small- and mid-sized banks rose less in May and June than they had in March and April. Business loans outstanding declined 0.6 percent over the current period after a previous 1 percent increase, while real estate loans increased much less than they had in the prior period. Consumer loans were the bright spot, increasing 0.5 percent after a slight decline in March and April.
Agriculture and Natural Resources
Most crops, aided by recent rainfall throughout the District, are in
good condition. The winter wheat harvest is nearing completion in
most District states, with yields and test weights generally
reported as good to excellent. Some Mississippi cotton growers
report that they have had to apply twice the normal quantities of
herbicides because of dry conditions earlier this spring and a
recent outbreak of weeds. Contacts in Kentucky and Mississippi
report higher prices for new farm machinery. After an exceptionally
rapid pace of first-quarter production, Southern pine lumber mills
report slightly lower production and exports. Lumber prices are
reported to have declined recently.