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Economic activity in the Eighth District has slowed slightly since our previous report. Although manufacturing activity has remained roughly flat, contacts' reports indicate continued softening in the services sector. Retail sales in February and early March declined compared with the same months in 2007. Auto sales remained largely unchanged over the same period. Home sales and residential construction continued to weaken throughout the District, but commercial real estate conditions remained favorable. Overall lending activity at a sample of small and mid-sized banks increased slightly during the first quarter of 2008.
Manufacturing and Other Business Activity
Manufacturing activity has remained steady since our previous report. There was roughly the same number of announcements of plans to open plants and expand operations in the near future as announcements of plans to close plants and reduce operations. Firms in chemical manufacturing and motor vehicle parts manufacturing reported plans to open new facilities in the District and hire workers. A contact in apparel manufacturing reported plans to hire additional workers. In contrast, contacts in furniture manufacturing reported plans to lay off workers. A firm in motor vehicle manufacturing idled production. Firms in wood product manufacturing and transportation equipment manufacturing announced that they will close plants in the District.
The District's services sector has continued to soften since our previous report. On the positive side, contacts in business support services and transportation services announced plans to expand facilities and hire additional workers. However, a larger number of firms reported plans to close facilities and lay off workers. Contacts in financial services reported plans to close facilities and lay off a large number of workers; job losses were also reported in educational services and publishing. In addition, general and big box retailers reported sales decreases in February and early March of 2008 compared with the same period in 2007. Auto sales in February and early March were roughly the same compared with a year ago, although smaller dealers experienced some decreases.
Real Estate and Construction
Home sales continued to decline throughout the Eighth District. Compared with the same period in 2007, February 2008 year-to-date home sales were down 17 percent in Memphis, 13 percent in St. Louis, 16 percent in Little Rock, and 14 percent in Louisville. Residential construction also continued to decline throughout the District. February 2008 year-to-date single-family housing permits fell in nearly all District metro areas compared with the same period in 2007. Permits declined 56 percent in Memphis, 32 percent in St. Louis, 20 percent in Little Rock, and 15 percent in Louisville.
Commercial real estate construction is active throughout the District. However, some contacts noted that commercial leasing may be slowing. A contact in northeast Arkansas reported that light commercial construction in general is holding steady and is quite active in some locations. A contact in south central Kentucky reported that the commercial market in the Bowling Green area continues to grow. Commercial contracting contacts in Memphis reported that their business outlook is positive for the next twelve months. A contact reported that commercial real estate leasing in central Arkansas has become sluggish. A contact in Louisville reported that commercial and industrial construction continues at a strong pace, although there have been delays on several large projects.
Banking and Finance
Total loans outstanding at a sample of small and mid-sized District banks increased 0.5 percent during the first quarter of 2008. Real estate lending, which makes up 74.3 percent of total loans, increased 0.4 percent. Commercial and industrial loans, accounting for 16.7 percent of total loans, increased 0.4 percent. Loans to individuals, accounting for 4.9 percent of total loans, increased 1.5 percent. All other loans, approximately 4.1 percent of total loans, increased 2.1 percent. Over this period, total deposits at these banks fell 2.9 percent.
Agriculture and Natural Resources
Total winter wheat acreage in 2008 increased by 23 percent from 2007, and most of each District state's crop was reported to be in fair or better condition in March. However, flooding in many areas of the District toward the end of March caused some winter wheat loss, and damage continues to be assessed in some areas. Farmers in the District reported that they expect to plant 10 percent fewer acres of corn in 2008 than in 2007. Similarly, they expect to plant 22 percent fewer acres of sorghum, 30 percent fewer acres of cotton, and 3 percent fewer acres of tobacco than last year. In contrast, they anticipate planting 15 percent more acres of soybeans than last year and 1 percent more acres of rice.
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