September 23, 1992
Summary
District economic activity continues to increase slowly. Retailers
and car dealers report increased sales from one year ago.
Manufacturing reports indicate growth, while nonmanufacturing
reports are more mixed. Residential construction activity still is
up substantially from one year ago in some areas, while it has
slowed in others. District loan demand remains weak, with large
banks reporting a slight decline in loans outstanding during the
past two months. District farmers report favorable harvest
prospects, but concern over an early frost is mounting.
Consumer Spending
Retail sales are generally above those of last summer. Back-to-school sales in St. Louis and Louisville are up noticeably from last
year, and contacts across the District report generally higher year-to-date sales as well. Price cutting by retailers was reported to be
similar to last year's efforts. Inventories are at or below desired
levels. Car and light truck sales are up moderately from last
summer, and dealers expect to see slight increases through year-end.
Manufacturing
Employment opportunities at District manufacturing firms appear to
have improved as reports indicate more hirings than layoffs. For
example, a new poultry processor will move into Arkansas, initially
employing 150 workers. In addition, a printing company will employ
100 people in its new eastern Mississippi plant. A Memphis steel
processor will add up to 150 jobs as it expands its facility. Also
in Memphis, a tire manufacturer has recalled 140 workers because of
increased sales, and a chewing gum manufacturer has added 170 jobs
in its expansion.
Cutbacks continue to occur in the defense industry. In particular, a St. Louis-based defense contractor announced its consolidation of six divisions into two, eliminating 170 St. Louis jobs immediately. The jobs of 7.000 St. Louis employees of this firm, however, became more secure with an announcement by the President of his support for the firm's aircraft sale to a foreign buyer. Unrelated to defense, a plant manufacturing jeans in northwestern Mississippi will close this month, releasing 550 employees.
Nonmanufacturing
District nonmanufacturing employment reports can be characterized as
mixed. An anticipated loss of 400 jobs occurred at a Louisville
health care provider and insurer. Potentially offsetting these
losses, however, are a travel agency's expansion of 100 jobs because
of a new contract and a supermarket chain's addition of 200
employees this month because of a new store. Southern Illinois will
gain 250 jobs when a new federal prison opens, and St. Louis will
likely gain some jobs when it becomes one of the U.S. Postal
Service's new regional headquarters under a reorganization plan.
A recent survey of Eighth District firms reveals that almost half of those surveyed experienced no change in sales during the second quarter and do not expect to change their inventory levels during the third quarter. In an unrelated survey by a temporary employment agency, half of the Memphis firms surveyed indicate that they will increase employment in the fourth quarter of 1992, a proportion more than double the national average.
Construction and Real Estate
District residential construction activity is mixed. Single-family
home permits in July were substantially above their year-ago levels
in St. Louis and Little Rock, but were down in Memphis and flat in
Louisville. New and existing home sales, meanwhile, remain above
their year-ago levels throughout the District. Contacts note that
the average selling price of new and existing homes has risen in
recent months. One Memphis realtor interprets recent sales trends as
evidence that consumer confidence has improved, noting that
purchases have been spread evenly between first-time homebuyers and
the move-up market.
Banking
Total loans outstanding at 12 large District banks declined slightly
in July and August after remaining flat in May and June. Business
and real estate loans declined over the period after increases in
the prior period. Consumer loans, which had declined 0.8 percent in
May and June, increased 2.2 percent in July and August. Bankers
continue to describe loan demand as soft.
Agriculture and Natural Resources
While crop prospects are mostly favorable throughout the District,
cloudy and cool weather in August has hampered maturity in many
areas. As a result, farmers are increasingly concerned about the
effects of an early frost, particularly for corn in Illinois,
Indiana and Kentucky. Although Hurricane Andrew caused minor damage
to the corn, cotton and soybean crops in some Mississippi counties,
it brought beneficial moisture to many areas of Arkansas and
Tennessee. Southern pine lumber producers report that production and
exports remain well above last year's vigorous pace. They also
report that inventory rebuilding is occurring in anticipation of a
relatively strong fourth quarter, partly in response to rebuilding
in the aftermath of Andrew.