May 5, 1993
Summary
District farms continue to report growth in both sales and
employment. Unexpected increases in demand have spurred some
companies to hire additional workers or cancel planned layoffs. Wet
weather has slowed District homebuilding, although many areas still
report permits and sales at or above last year's levels. Consumer
and small business loan demand continues to increase at area banks;
some bankers are concerned, however, that slow deposit growth could
hamper their efforts to fund further increases in loan demand.
Excessive moisture and unseasonably cool temperatures have delayed
spring planting throughout the District.
Manufacturing
Reports from District manufacturers continue to be upbeat, as both
sales and employment are increasing. Sales increases in the range of
4 percent to 10 percent over last year are not uncommon. One contact
reports a steadier stream of revenues this year relative to last,
citing the customers' use of just-in-time inventory as the cause.
Many firms report employment increases because of expansions and
increased demand. In particular, Arkansas is witnessing spurts of
growth from various industries. A steel processor will open a plant
in the northeast part of the state, which brings the total to six
steel-related plant openings in this area over the past year. In
western Arkansas, the expansions of a wheel manufacturer and two
apparel manufacturers will add about 250 jobs, while a maker of
major household appliances is adding 400 workers because of
unexpectedly strong demand.
Reports from other areas of the District are also positive. For example, a Tennessee plant producing shoes with a workforce of 260, originally slated to close, will remain open indefinitely because of unexpected increases in demand. This is the second time this year the company has reversed its plans to close one of its plants because of unexpected growth in demand. In March, a steel foundry in Illinois reopened after 18 mouths with 330 recalled employees. The firm also reports that up to 1,000 additional workers may be hired soon to meet the expected demand. A poultry processor in western Kentucky is undergoing a major expansion that will lead to 300 new jobs.
Some employment reductions did occur, however. A Tennessee producer of children's clothing reports that reduced sales and internal efficiency concerns will cause it to close a plant by June, eliminating about 300 jobs. In Memphis, a maker of food products will release up to two-thirds of its current 350 employees as it stops production of bulk products for other food companies. Because of a reorganization, a national computer company will lay off about 200 of its 550 workers in St. Louis.
Nonmanufacturing
Reports from District nonmanufacturing firms also continue to be
positive. For example, an Arkansas building supplies company reports
that sales are up 11 percent over last year because of strong growth
in housing starts. The relocation of a nursing homes operator from
Virginia to Arkansas will bring between 300 and 400 jobs into the
area by next year, completing this firm's consolidation in Arkansas.
A retail holding company that is moving its headquarters to St.
Louis reports that 100 new jobs, in addition to the 430 jobs coming
from New York, will be added. An athletic apparel maker,
consolidating its national distribution in Memphis, is bringing 100
jobs. In addition, a retailer in southern Illinois reports that when
its remodeling is complete by year-end, it will need 300 new
employees. The District's mining industry, though, contracted
further when an Illinois coal company announced that it will close
two mines this month, laying off more than 370 workers.
Construction and Real Estate
Wet weather in much of the District has dampened homebuilding,
although many areas still report construction activity at or above
last year's pace. Rain and mud have put many District homebuilders
30 to 60 days behind schedule. Despite the weather, traffic and
sales activity is reportedly moderate to strong throughout the
District. Sales of houses priced in the $l00,000-to-$150,000 range
are especially strong in Louisville. New home prices have risen
slightly because of the pickup in demand and increases in materials
costs, especially lumber.
Banking and Finance
Loan demand appears to be on the upswing in many parts of the
District. Consumers continue to refinance variable-rate debt with
fixed-rate instruments: at the same time, consumers and small
businesses have increased their demand for new loans, bankers
report. Several contacts are concerned about slow deposit growth,
believing that the low rates being paid on deposits have led many
customers to move funds out of the banking system. They also worry
that, should a sharp upturn in loan demand occur, it will be
difficult to fund without significant increases in deposit rates or
purchased funds.
Agriculture and Natural Resources
Surplus soil moisture and unseasonably cool spring temperatures are
reported in most District states. Consequently, spring tillage and
planting operations have proceeded at an unusually slow pace: corn,
cotton and rice planting are well behind normal in most areas. Two
large fertilizer producers and distributors report that sales have
been adversely affected by the weather, but should pick up if the
weather improves soon. Although the cool weather has significantly
damaged the blueberry and strawberry crops in parts of Arkansas,
Mississippi and Tennessee, the peach and apple crops in some areas
have benefited. The winter wheat crop in most states is generally in
good condition, although some concerns about moisture-related
diseases have been expressed, Initial estimates suggest that
District farmers intend to plant less corn and rice this year, but
more soybeans. Cotton acreage should be near last year's level.
Flooding along many of the major rivers in the District has barge
activity hamstrung recently.