November 2, 1994
Overview
The Tenth District economy continues to grow at a healthy pace.
Retail sales increased over the past month and manufacturers
continue to operate at high levels of capacity. District energy
activity is improving somewhat. In the farm sector, conditions are
generally good for crop producers but somewhat less favorable for
cattle producers. Meanwhile, residential construction and sales of
new homes continue to slow. Retail prices remain stable, while the
prices of manufacturers' inputs are up from a year ago.
Retail Sales
Retailers report sales increases over both the past year and the
past month. Sales remain strongest in apparel and home furnishings.
Prices have been stable since last year and are expected to remain
steady for the rest of this year. Most respondents expect sales to
continue to rise over the next few months. While most retailers are
satisfied with current inventory levels or are expanding inventories
for the holiday season, a few are trimming inventories.
Auto dealers report that sales have generally been stable over the past month but are concerned about a lack of supply. Most dealers are optimistic that sales will increase in the near future as new models become more widely available. Financing is generally available for both dealers and consumers.
Manufacturing
Purchasing agents report input prices are higher than a year ago,
and some expect input prices to increase further in the next few
months. Several agents report longer lead times in obtaining
materials but do not expect major bottlenecks during the next few
months. Firms are generally satisfied with current inventory levels,
but a few plan to reduce inventories in the months ahead. Most firms
are operating at high levels of capacity, and a few report shortages
of skilled labor. Exporting firms report a slight increase in sales
and expect sales to grow through the rest of the year.
Energy
Energy activity in the district has begun its usual fourth quarter
surge despite soft crude oil and natural gas prices. In September,
the average number of drilling rigs in the district surged, while
crude oil prices fell for the second straight month and natural gas
prices hit a two-year low. In the first two weeks of October, the
district rig count continued to climb but remained below its year-
ago level.
Housing
Housing starts and sales of new homes are generally down over the
last month. Most respondents expect starts and sales of new homes to
remain stable in the near future. Prices of new homes are stable to
slightly lower than last month. Delivery times and prices of
materials are mostly unchanged, although some builders report
problems obtaining concrete. Mortgage demand continues to decline
with higher interest rates. Lenders expect demand to remain sluggish
in the months ahead.
Agriculture
The district's corn and soybean harvest is ahead of schedule.
Agricultural bankers report above-average yields with some record
yields reported in Nebraska. Winter wheat planing is nearly
complete. Although dry conditions forced farmers to cut back planted
acreage in Oklahoma and Colorado, recent rains have substantially
improved the prospects for the district's wheat crop. The earlier
dry spell hurt pasture conditions in the district, causing many
cow/calf operators to sell calves earlier than normal. The large
number of cattle entering feedlots this fall suggests cattle pi ices
may not strengthen in the near future.
Banking
Loan demand at most reporting banks rose last month, due to rising
demand for commercial and industrial loans, consumer loans, and
commercial real estate loans. Demand for home equity loans and
construction loans was flat to up. Changes in demand for home
mortgages and agricultural loans were mixed. Loan-deposit ratios
were up at most banks over the last month, while security
investments were flat to down.
Only one of the responding banks raised its prime rate last month, but about half of the banks expect to raise it in the near term. Most banks increased consumer lending rates last month and expect to raise them slightly in the near term. None of the respondents changed its lending standards over the past month.
About half of the banks reported no change in deposits last month, while the other half were divided between increases and decreases. Large CDs, IRAs, and Keogh Accounts were flat to up, while NOW accounts and MMDAs were flat to down. Changes in demand deposits and small time and savings deposits were mixed.