December 8, 1993
Overview
The Tenth District economy continues to grow at a moderate pace.
Retail sales and housing activity are still increasing, and loan
demand at commercial banks is strengthening. District farm income
should nearly match last year's level, but gains in the energy
sector appear to be slowing. Retail prices continue to hold steady,
and manufacturers' input prices are rising only slightly.
Retail Sales
Most district retailers report increased sales, compared with both a
year ago and a month ago. Sales of men's and women's apparel have
been notably strong. Holiday sales are reported to be good so far,
and respondents generally expect significant gains over a year ago.
While most retailers are satisfied with current inventory levels,
some believe their stocks are too large. Most respondents expect to
maintain inventories at normal levels following the usual seasonal
buildup and drawdown. Retail prices have remained generally flat
over the past year, and retailers expect to hold prices steady over
the next few months.
Automobile sales increased last month and most dealers are optimistic about future sales. Financing is readily available for dealer inventories and potential buyers. Dealers are expanding inventories with 1994 models.
Manufacturing
Most purchasing agents report small price increases for their inputs
over the past year, with some increases continuing in the past
month. Agents expect few price increases in the near term. While a
few respondents report some difficulty in obtaining specific inputs
(such as carbon black), most find materials readily available and
expect few problems in acquiring inputs in the months ahead. Most
firms are satisfied with their present inventory levels, having
trimmed them recently. Export sales are expected to remain about
steady in the short run.
Energy
Gains in district energy sector activity appear to be slowing amid
slumping oil prices and a recent dip in natural gas prices. Still,
all energy-producing states in the district report steady or
increased drilling activity except New Mexico, where the number of
active drilling rigs fell in early November. Overall, the average
number of operating drilling rigs in district states rose from 284
in September to 294 in October. The rig count slid to 291 in the
first three weeks of November, however, about 5 percent below its
year-ago level.
Housing
Housing starts picked up moderately last month and remain above
their year-ago level. Builders generally expect starts to rise over
the next few months. Most respondents report new home sales steady
compared with last month, but up from a year ago. The inventory of
unsold homes is low. Demand for mortgages has been strong and is
expected to remain so. Mortgage rates have begun to edge up, but
most respondents expect rates to level off in the period ahead.
Higher lumber prices continue to push new home prices up, and most
respondents expect this trend to continue in the near future.
Banking
District banks report stronger loan demand last month. Most
respondents report increased demand for consumer loans, home
mortgages, construction loans, agricultural loans, and commercial
real estate loans. Demand was mixed for commercial and industrial
loans, and home equity loans. Changes in loan-to-deposit ratios were
mixed at responding banks, while bank investments were generally
lower.
No respondents changed their prime rates last month, and no changes are expected in the near term. Most respondents lowered consumer lending rates over the past month through special promotions. About half the survey respondents expect to raise these rates soon by concluding the promotions, while the rest expect no change in the near term. Lending standards at all banks were unchanged.
Deposits increased at almost all responding banks last month. Deposit growth was concentrated in demand, NOW, and money market deposit accounts. IRA and Keogh accounts were mostly unchanged, while large CDs and small time and savings deposits were flat to down slightly.
Agriculture
The weather has favored the district's recently planted winter wheat
crop but has taken a large toll on the corn and soybean crops. The
winter wheat crop is generally in very good condition, encouraged by
ample moisture and favorable temperatures. Harvest of the district's
corn and soybean crops is nearly complete. Crop yields and quality
have been disappointing in those parts of the district where last
summer's wind, wet weather, and flooding caused large crop losses.
Despite the crop losses, district bankers expect little increase in problem farm loans. Crop prices have risen to ration smaller crop supplies, lessening the sting of crop losses for many farm borrowers and boosting incomes for others who harvest normal or near normal crops. In addition, government disaster assistance and sales of grain stored from previous harvests will help cushion the blow of crop losses for many district farmers.
Higher crop prices also are likely to push up feed costs and trim profits in the district livestock industry, the dominant source of farm income strength in recent years. District bankers report that higher feed costs are encouraging some cattle and hog producers to scale back their production plans in spite of relatively strong cattle and hog prices. Overall, district farm income should nearly match last year's relatively healthy level, despite a harsh year for some district farmers.