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October 27, 2004
Federal Reserve Districts
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Reports on economic activity in the Eighth District were mixed in the period since our previous survey, particularly in the manufacturing sector. The number of manufacturing contacts reporting plans to open plants or expand operations was roughly equal to the number of contacts reporting plans to close plants and lay off workers. In contrast, contacts in the services sector generally reported strong activity. Retail and auto sales were flat to slightly down in August with respect to year-earlier levels. Residential real estate markets continued to do well. Total loans at a sample of small and mid-sized District banks increased from late June to late September. Manufacturing and Other Business Activity Reports from contacts in the manufacturing sector in the period since our previous survey were mixed. A number of manufacturers reported plant openings and expansions and a similar number of contacts reported plant closings and cutbacks. Firms in the nonmetallic minerals, automotive parts, and fabricated metal products industries announced plans to open new plants that would create 650 new jobs. Firms in the machinery, steel, freight transportation equipment, fabricated metal products, and plastics industries reported plans to expand existing plants, renovate production lines, add new space, and hire additional workers. In contrast, firms in the mining and natural resources, machinery, and nonmetallic minerals industries announced plans to close plants, displacing as many as 400 workers. Firms in the machinery, rubber products, computers and electronics, and automobile industries announced plans to consolidate and restructure their workforce, displacing about 500 workers. In the services sector, most contacts reported an increase in activity since our previous survey. Firms in the software development and pharmaceutical research, development, and marketing industries reported plans to relocate their headquarters to the District, adding as many as 350 new jobs. In addition, firms in the military, freight transportation, and financial services industries reported facility openings and renovations that would create almost 900 new jobs. Despite reports of generally strong activity in the services sector, firms in the automotive maintenance and repair and health care industries are cutting back on their workforce. Many District auto dealers and general retailers reported flat to slightly down sales in August from the same month a year ago. Major department and discount chains, in particular, reported slow sales. Other retailers, including those in the home goods, furniture, and clothing industries reported plans to open new facilities. Real Estate and Construction Residential sales were up in most of the District in August. In Memphis, August year-to-date sales increased by 16.1 percent compared with the same period in 2003. The increase in August year-to-date sales was 4.7 percent for the greater St. Louis area and 12 percent for southern Indiana. Sales slowed down somewhat in north central Arkansas. Year-to-date single-family housing permits continued to increase in most of the District's metropolitan areas compared with the same period last year. August year-to-date permits in the greater St. Louis area increased by 19.5 percent compared with the same period in 2003, while August year-to-date housing starts grew by 6.9 percent in the Tupelo region compared with the same period last year. Residential construction also increased in southern Indiana and northeast Arkansas, but it slowed down considerably in west Tennessee. Activity in the District's office and industrial real estate markets has been mixed in recent months. The third quarter office and industrial vacancy rates in the St. Louis metropolitan area experienced little change compared with the previous quarter. The overall office vacancy rate rose by 10 basis points, while the overall industrial rate fell by 10 basis points. The office vacancy rate in Bentonville, Ark., increased by 5.3 percentage points to 19.6 percent during the first half of 2004. The pace of commercial construction continued to increase modestly in most of the Eighth District. Contacts in north central Arkansas reported a slight increase in construction, and construction activity was steady in southern Indiana. Banking and Finance Total loans outstanding at a sample of small and mid-sized District banks increased 2.2 percent from late June to late September. This increase stems from a 2.9 percent rise in real estate loans along with a modest 0.4 percent growth in commercial and industrial loans. Loans to individuals and loans to commercial banks continued to decline, dropping by 1.3 percent and 4.8 percent, respectively. Over the same period, total deposits at these banks rose 3.2 percent. Agriculture and Natural Resources Recent dry weather has allowed crop harvests to progress nicely. Nearly all corn has been harvested in the District states, except in Illinois, Indiana, and Missouri. The soybean harvest is well ahead of its average pace, and farmers have harvested over half of the entire soybean crop. Farmers in the District states expect higher yield and production of both corn and soybeans compared with last year. Farmers in Arkansas and Mississippi have nearly finished the sorghum harvest, and almost all of the District rice and about half of the cotton have been harvested. Winter wheat planting is under way but behind schedule in most District states. Missouri is the only District state where a majority of the soil moisture levels are rated as adequate or surplus, and Tennessee is the only District state with the majority of pastures rated in good or excellent condition.
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