May 5, 1993
Overview
The Tenth District economy is expanding at a moderate pace. Retail
sales are rising, the housing sector remains strong, and demand for
bank loans is up in most categories. Prospects for farm income are
good despite weather-related problems, and the energy sector appears
to have stabilized. District manufacturers continue to operate below
capacity. Prices for retail goods and manufacturers' inputs are
stable, but prices for building materials are increasing somewhat
further.
Retail Sales
Retailers report moderate improvement in sales relative to last
month and a year ago, despite poor weather conditions. Most
retailers report strength in apparel sales. Prices are stable or
slightly lower compared to a year ago, as retailers have trimmed
profit margins. Prices are expected to remain stable over the next
year. Most respondents are satisfied with inventory levels. Sales
are expected to continue improving over the next several months.
Auto dealers report sales increases from last month and continued availability of dealer financing. Dealers are maintaining or increasing inventories and remain optimistic about sales in the near future. A few respondents report that some less credit-worthy consumers have had difficulty getting financing.
Manufacturing
Purchasing agents report steady to slightly higher input prices
relative to last year, except for a significant rise in the price of
steel. Prices are expected to remain stable over the next few
months. Materials are available, although lead times are slightly
extended. Firms are operating below capacity and are trying to cut
costs by delaying hiring additional labor. Firms that export report
a decrease in sales abroad.
Energy
Drilling activity in the district is stable following declines at
the beginning of the year. The average number of operating drilling
rigs in district states fell from 223 in February to 191 in March.
The rig count rebounded somewhat in the first three weeks of April,
however, to an average of l94. During the recent two-month period,
drilling activity in the district was about even with year-ago
levels.
Housing
Housing starts are generally up relative to last month. Most
builders expect starts to pick up further in the period ahead as the
weather improves. Sales of new homes are up, and inventories are
low. Home prices are up from last month. Building materials are
readily available, but respondents report some increase in lumber
prices.
Mortgage demand is strong in response to lower interest rates, with much of the strength due to refinancing. Respondents expect mortgage demand to remain strong and interest rates to remain low.
Banking
Bankers report somewhat stronger loan demand last month. Demand
increased for commercial and industrial loans, consumer loans, and
residential real estate loans. Demand for agricultural loans and
commercial real estate loans, however, was unchanged. The loan-to-
deposit ratio increased slightly over the last month, as did the
level of bank investments.
District banks did not change their prime rate in the last month and expect no change in the near future. While most banks did not change their consumer loan rates, a few respondents report recent reductions in consumer rates Banks also did not change their other lending standards in the last month, except that one respondent tightened home equity lending standards.
Deposits were steady to slightly higher during the last month. The deposit growth centered in demand deposits, NOW accounts, and MMDAs. Large CDs declined slightly, while small time deposits and savings deposits were steady to slightly lower.
Agriculture
The district's important winter wheat crop is in good condition
overall. Although some areas are showing signs of winter kill or
excessive moisture, most of the crop is making progress and is
considered to have favorable prospects.
Row crop producers have made little planting progress due to an unusually wet spring. Muddy conditions continue to keep farmers out of their fields as frequent showers and cool temperatures have prevented adequate drying. Most of the fieldwork that has been completed was done last fall.
Feedlot conditions have improved since winter storms pounded much of the district. Although feedlots are not operating at capacity, they are generally as full as operators want them. With fed cattle prices hovering around $82, feedlot managers are marketing cattle as quickly as they can. Poor weight gains and death loss due to the winter storms, however, still hamper efforts to maintain steady marketings.
The volume of farm real estate sales in most parts of the district remained steady over the past year, while land values edged up. According to district agricultural lenders, farm real estate values have advanced 3 to 4 percent in the past year. The cash rental value of farmland, however, has fluctuated little from 1992.