November 3, 1993
Overview
Moderate growth continues across most of the Tenth District economy.
Retail sales are increasing and housing activity is strengthening.
Demand is up for business loans, consumer loans, and home mortgages.
Cattle feeders and ranchers have enjoyed several months of solid
profits. While manufacturers' input prices are rising somewhat,
retail prices are generally holding steady.
Retail Sales
Most district retailers report stronger sales, compared with both a
year ago and a month ago. Retailers generally expect further sales
increases in the next few months, and about half intend to increase
inventories over that period. Retail prices are generally holding
steady and are not expected to change much in the months ahead, as
they are restrained by vigorous competition.
Auto dealers report increased sales last month. Financing is available for dealers and buyers. Inventories are low, but dealers are adding stocks of 1994 cars due to their optimistic outlook for sales.
Manufacturing
Most purchasing agents report that input prices are somewhat higher
than a year ago and up from a month ago. In the near term modest
price increases are expected to continue. Materials are readily
available, and purchasing agents expect no availability problems for
the rest of the year. Most agents say their inventories are too high
and are being trimmed. Export sales are expected to remain steady
for the rest of the year.
Energy
Drilling for natural gas and oil continues to pick up across most of
the district. All district energy-producing states report recent
increases in drilling activity except Wyoming, where the number of
active rigs edged down in the first part of October. Overall, the
average number of operating rigs in district states climbed from 264
in August to 284 in September and 297 in the first three weeks of
October. Despite these recent increases, the average rig count
stands only about 3 percent higher than one year ago.
Housing
Housing starts remain higher than a year ago despite a slight
weather-induced decrease last month. Over the rest of the year,
builders expect starts to rise. Sales of new homes are steady or
slightly higher than a year ago, and the inventory of unsold homes
is low. Higher lumber prices have contributed to higher prices for
new homes. Builders expect further price increases for lumber in the
coming months.
Demand for mortgage funds remains strong as borrowers refinance and low rates persist. Mortgage rates are expected to be steady to slightly lower in the near term, and are expected to firm slightly next year.
Banking
Loan demand over the last month was steady to somewhat stronger at
district banks. Most respondents experienced greater demand for
commercial and industrial loans, consumer loans, and home mortgages.
Demand was steady to somewhat stronger for home equity loans,
residential construction loans, and commercial real estate loans.
Demand for agricultural loans was mixed. Survey respondents reported
loan-deposit ratios were unchanged to slightly higher over the last
month.
None of the respondents changed their prime rate last month, and only one expected to change it in the near term. While a few banks lowered consumer loan rates, most had not; and few expected to change rates in the near future. All respondents reported no change in their other lending standards.
Deposit flows were mixed over the last month. Roughly equal numbers of respondents reported an increase, decrease, and no change in deposits. Demand deposits, NOW accounts, and money market deposit accounts are steady to higher at most responding banks. Large CDs, IRAs, and Keogh accounts were mostly unchanged over the last month, while all time and savings deposits were steady to somewhat lower.
Agriculture
The district's fall harvest is now in full swing after a late start
caused by wet fields. Last summer's wet weather and flooding
destroyed corn and soybean crops planted in low-lying areas along
the Missouri River and its tributaries in Missouri, Kansas, and
Nebraska. But bankers report normal yields in other parts of the
district. Cotton and peanut yields in Oklahoma and New Mexico are
generally above normal.
The district's next winter wheat crop is off to a good start. Planting is almost finished, and favorable growing conditions have bolstered the crop's early development. The new winter wheat fields are providing excellent forage for district cattle herds. Hay and other sources of forage are also in ample supply in the district.
Despite several months of solid profits, district cattle feeders and ranchers are wary about expanding herds after a recent downturn in fed cattle prices. Similarly, bankers see little expansion underway in district hog production, despite continued strength in hog prices.
Many district bankers report an uptick in nonfarm business activity in their communities, although some communities continue to struggle. Overall, most rural bankers in the district are optimistic about business conditions in their communities.