August 4, 1993
Summary
Despite flooding in parts of the District, contacts report that
their operations have been largely unaffected. For most
establishments, the biggest change has been the use of trucks rather
than railroads for their transportation needs. A preliminary
assessment puts a lower bound on damage from flooding in the
District at $1.5 billion to $2 billion. This estimate is tentative
at this point and subject to a relatively large forecast error.
Flooding aside, other reports from District firms are mixed, with some experiencing modestly increased sales and others having flat or declining sales. Residential construction activity is strong in most areas of the District, as are new and existing home sales. Area banks for the most part were unaffected by recent flooding. While excessive rainfall and flooding have affected northern portions of the District, hot, dry weather is the norm in the southern reaches.
Manufacturing and Other Business Activity
Most contacts in both flooded and non-flooded areas report that the
flooding has had minimal effect on their operations. Delays in
transporting supplies and output because of flooded rail lines are
the main hardship. A switch to trucking has created little
disruption and has sufficed for most establishments. One major
manufacturer in St. Louis has had to close a plant because of an
evacuation order. Other large manufacturers along the Missouri
River, especially near Jefferson City, and along the Mississippi
River have had to close temporarily because of flooding. In total,
the Missouri Department of Employment Security estimates that about
10,000 workers have been shut out of their workplaces by flood
waters. This number will fluctuate, of course, as the rivers
continue to rise and fall.
Public utilities in the affected areas report that service has been maintained, although in some cases a great deal of overtime has been employed to stay on top of service losses. Most major terminals and substations have been unaffected by the flooding. The total extent of flood damage at the household level, though, cannot be determined until flood waters recede and people return to their homes.
Retailers in the St. Louis area report sales, especially in apparel, as relatively flat compared with the same period last year. The riverfront has seen an increase in foot traffic, but no proportionate movement in purchases. Some are concerned that misinformation reported in the media about flooding in the St. Louis area could lead to a decline in retail sales in the coming weeks because potential tourists cannot distinguish between the city's flooded and non-flooded areas. Apparently the national attention has yet to affect the city's convention business, however.
Contacts in the iron, hydraulic parts and oil-extraction equipment industries report that sales are good and growing modestly. One contact emphasized international sales as being strong, especially from developing countries, while domestic sales are almost nonexistent. Many domestic firms, the contact reports, are postponing capital equipment expenditures until 1994. A contact from the heating and cooling industry reports that industry-wide sales have fallen dramatically and that inventories are growing.
According to a recent National Federation of Independent Businesses survey of District firms, about one-half of the respondents do not believe this is a good time to expand. One-fourth of the respondents felt conditions in the coming six months would be somewhat worse; however, one-fourth will increase employment this quarter.
Construction and Real Estate
Declining interest rates continue to stimulate new construction and
both new and existing home sales in most parts of the District. The
housing market in Little Rock remains tight, as potential buyers
outnumber available properties. Contacts report rising prices for
new and existing homes as well as rental properties. The St. Louis
and Memphis markets have also picked up in recent months, although
homebuilders in St. Louis are still behind because of the weather.
Contacts in the two cities also report improving conditions in
commercial real estate markets: In St. Louis, retail vacancy rates
are down and rental rates are up; in Memphis, speculative warehouse
building is on the rise.
Banking and Finance
Most District banks in flooded areas have faced minimal disruptions
to their businesses. Several area banks are offering special loan
products and low rates to flood victims. Outside the flooded areas,
consumer loan demand is reported to be increasing, especially for
auto loans. Mortgage refinancings at area financial institutions
continue at a brisk pace. No appreciable pickup in commercial loan
demand has been reported.
Agriculture and Transportation
Weather conditions vary dramatically throughout the District. In the
northern parts of the District, flooding has affected an estimated
1.7 million acres in Missouri, more than 750,000 acres in Illinois
and roughly 35,000 acres in Kentucky. In areas that have not been
affected, the corn and soybean crops are in mostly good condition,
and those farmers are reaping the benefit from higher grain prices.
Much drier weather has prevailed in the southern portions of the
District. Contacts in Arkansas report that dry, hot weather has led
many farmers to irrigate their crops. Arkansas poultry producers
report thousands of chickens have died because of the heat.
According to the Army Corps of Engineers, the Port of St. Louis probably will not open until late August or early September. The closure of the upper Mississippi to barge traffic has led to only a slight increase in activity on the Ohio River, principally grain shipments. Flooding has also disrupted rail and trucking activities. A large District trucking firm reports that although shipments are off from one year ago, they are receiving some business they would not usually receive because of rail and barge disruptions.