November 3, 1993
District economic activity continues to grow slowly even though several larger firms have announced reorganizations, some entailing job losses. Small businesses, in particular, report strong growth for the past two months. Residential construction continues to be a source of strength in most areas of the District. Loan demand is also on the upswing. The pace of the fall harvest remains significantly behind normal because of the lateness of the crop and recent, persistent rainfall.
Manufacturing and Other Business Activity
Reports from District firms continue to be mixed, as expansions and
new plants create jobs in some industries, while reorganizations add
to the number of layoffs in others. Small businesses, in particular,
report stronger growth recently and are preparing for increased
activity in the near future. Some larger companies, however,
continue to lay off employees as they reorganize.
A survey of small businesses reveals that the recent upswing in activity has also led to new plans for capital outlays, inventory increases and employment gains. In fact, only 23 percent of the surveyed firms believe that conditions in the coming two quarters will deteriorate rather than improve. A contact in the construction materials industry reports strong sales, especially brick. The industry is experiencing a four-to-six-week backlog, and plants are running at capacity. The contact expects the growth to continue through the first half of next year, but expects 1994 so be slightly weaker than 1993 overall. Contacts report that sales are up 8 percent over last year in the glass container industry and 10 percent at discount stores. Very strong sales are also reported by mattress manufacturers and paper manufacturers. A rug manufacturer reports that plants are running seven days a week to meet demand. District auto dealers report that showroom traffic is up and that, in some areas, domestic sales are the strongest they have been in 10 years. The furniture industry in northern Mississippi continues to grow with the opening of another plant, while northeast Arkansas' steel industry expands with the announcement of plans for a new mill. Retail sales in Illinois increased sharply after the bridges across the Mississippi River reopened following recent flooding.
Several larger firms have announced plans to reorganize and reduce employment. A telecommunications firm has already laid off 800 of a total of about 1.500 nonunionized workers to be let go, 200 of whom were in the St. Louis area. An alcoholic beverage and snack producer announced a reduction of 1,200 jobs, with about 500 in St. Louis. This cut will be almost offset, however, when the firm's snack division moves to St. Louis, bringing 475 positions. A maker of undergarments will close its Mississippi operations this month, eliminating almost 300 jobs. A contact in the apparel industry notes that more plants have been closing than are opening recently; much of this is business lost to foreign competitors. A local cable television company in Arkansas closed its plant last month after nearly 30 years, affecting about 140 employees.
Construction and Real Estate
Residential real estate construction, though slowing somewhat,
continues to be above year-ago levels in most areas of the District.
Unseasonably wet weather, however, has put builders in some areas,
particularly St. Louis, weeks and even months behind schedule. Many
District builders and real estate agents report falling inventories
and rising prices of new and existing homes. In Central Arkansas,
residential properties in the $70,000-to-$90,000 range are said to
be in short supply; employment increases by area firms are spurring
housing demand.
Banking and Finance
Loan demand--especially for consumer loans--continues to strengthen
in the District. Total loans outstanding at a sample of 102 small,
mid-size and large banks increased more from mid-August to mid-
October than they had from mid-June to mid-August. Some bankers are
concerned that core deposit growth is not keeping up with loan
demand and that alternative investment products such as mutual funds
are draining actual and potential deposits from their institutions.
Agriculture and Natural Resources
Wet weather has slowed the pace of the fall harvest in many areas
and slowed the seeding of the winter wheat crop. Early reports
indicate that weather disturbances earlier in the year have kept
yields below expectations in many cases. Moreover, unusually low
test weights for corn have been reported in certain areas. Some
isolated areas, however, have reported record or near-record corn
and soybean yields. Contacts in parts of Illinois and Arkansas
report that the soybean size is smaller than usual this year,
because of unusual dryness during a crucial phase of the growing
season. Still, Illinois farmers should harvest their second-largest
crop ever.
Delta cotton farmers report that yields have been significantly reduced because of heat and insects. Although yields on this year's rice crop appear to be running below last year's, analysts still expect an average size crop. There are also scattered reports that the milling quality of this year's crop is lower than usual. Rice prices have risen recently on the expectation that the Japanese, because of an anemic harvest, are contemplating a purchase of Arkansas rice. Some Arkansas and Mississippi farm equipment dealers report that sales have declined recently because of poor crop prospects. Arkansas timber producers report a firming of prices recently. Southern pine lumber producers report orders are running ahead of last year's strong pace.