August 4, 1993
Overview
The Tenth District economy continues to grow at a moderate pace.
Retail sales are still increasing, housing activity remains strong,
and bank loan demand is up slightly. The energy sector continues to
improve, and many district farmers expect strong earnings despite
wet weather and flooding. Retail prices are generally steady and
manufacturers report stable to slightly higher input prices.
Retail Sales
While most district retailers report only a slight improvement in
sales compared with a year ago, retail sales have strengthened in
the past month. Small sales increases were reported for most
categories of merchandise, with furniture sales being relatively
stronger and apparel sales weaker. With consumer demand sluggish
recently, retailers are holding prices steady and intend to hold
prices relatively constant over the next three months as sales are
expected to improve only marginally. Instead of buying leading
brands, some retailers are stocking cheaper goods of comparable
quality. Satisfied with current inventory levels, retailers plan no
changes for the rest of the year.
Auto dealers report a strong increase in sales over the past month, Ample financing is available for both dealers and potential buyers. Most dealers are satisfied with current inventory levels and expect strong sales for the remainder of the year.
Manufacturing
Purchasing agents report stable to modestly higher input prices
compared with a year ago. Input prices are expected to remain
unchanged or rise slightly in the near term. While materials are
readily available, lead times for some steel products have
increased. Respondents are either satisfied with their current
inventories or are trimming them slightly. Although many respondents
are operating near full capacity, few bottlenecks are reported.
Exporting firms report that sales abroad are increasing or steady.
Energy
Drilling activity in the district continues to improve despite
generally soft oil prices. The average number of operating drilling
rigs in district states jumped from 203 in May to 240 in June.
During the first three weeks of July, the district rig count crept
up to 244. As a result, the average rig count stands about 12
percent higher than at the same time a year ago.
Housing
Builders report that housing starts were up slightly or steady in
the last month, and up significantly from a year ago. Sales of new
homes are also higher relative to both a month ago and a year ago.
As a result, new home inventories are low. Building materials are
readily available, but builders expect prices of materials,
especially lumber, to rise further in the near future.
Mortgage demand remains strong because of low mortgage interest rates. While mortgage rates have continued to fall slightly in recent weeks, most respondents expect them to show little or no change over the rest of the year.
Banking
District bankers report slightly stronger loan demand last month.
Consumer loan and construction loan demand were up at most banks,
while commercial and industrial loan demand was constant to up.
Demand for home mortgages and commercial real estate loans was
mostly unchanged. Loan-deposit ratios were constant to up from the
previous month and mostly up from a year ego.
No respondents changed their prime rate last month, and none expects to change that rate in the near future. Consumer lending rates were also constant at almost all banks, with no change expected in the near term. Lending standards were generally unchanged.
Deposits were up at most responding banks during the last month. Demand deposits were mostly higher. NOWs and MMDAs were mixed, however, and large CDs and small time deposits were constant to down.
Agriculture
Wet weather and flooding have caused significant crop losses in
Kansas, Missouri, and Nebraska. Some farmers were unable to plant
corn and soybeans due to prolonged wet weather, and some crops were
destroyed by flooding. Corn and soybean yields are expected to be
below normal, but wide margins for error bracket current estimates
of crop losses. Missouri, where up to a fifth of the state's corn
and soybean acreage may have been lost, accounts for the lion's
share of the district's crop losses.
The wet weather has also slowed the district's winter wheat harvest. A large wheat crop is expected despite the slow pace of the harvest and hail storms that have reduced wheat yields in some areas.
The net effect of the wet weather on the district farm economy will be small, although failures among marginal farm borrowers are expected to continue. Several years of solid earnings have shored up farm balance sheets across the district, enabling most farmers to ride out the rough weather. In addition, many district farmers still expect strong earnings this year. Farmers who harvest normal or near-normal crops of corn and soybeans will benefit from higher crop prices, and the large wheat crop will bolster farm incomes in much of the district. Most livestock producers in the district expect solid earnings, although higher corn and soybean prices will push up feed costs end trim profit margins.