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Economic activity in the Eighth District has expanded modestly since our previous report. Manufacturing activity increased, on balance, as did activity in the services sector. Residential real estate market conditions were mixed. Although commercial and industrial real estate market conditions remained soft, there were reports of increased activity in some areas. Overall lending activity at a sample of small and mid-sized banks in the District declined in the three-month period from mid-June to mid-September.
Manufacturing and Other Business Activity
Manufacturing activity has continued to increase since our previous report. Several manufacturers reported plans to open plants and expand operations in the near future, while a smaller number of contacts reported plans to close plants or reduce operations. Firms in the detergent, frozen foods, transformer, plastic products, motor vehicle parts, and primary metal manufacturing industries reported plans to expand existing operations and hire new employees. Contacts in the construction machinery, electronic component, and wood product manufacturing industries reported plans to open new facilities in the District as well as hire new employees. In contrast, firms in the appliance, tobacco, chemical, and furniture manufacturing industries announced plans to decrease operations and lay off workers.
The District's services sector has also continued to improve since our previous report. Firms in the restaurant, automotive repair, air transportation support, and social services industries opened new facilities in the District and hired new employees. In contrast, contacts in the business support services, hotel, and gambling industries reported plans to decrease operations and lay off workers. Sales of new automobiles were down compared with the same time last year, while used automobiles have shown stronger sales. General retail contacts reported that sales were flat over the reporting period.
Real Estate and Construction
Home sales were mixed throughout the Eighth District. Compared with the same period in 2009, August 2010 year-to-date home sales were down 4 percent in St. Louis and 2 percent in Memphis. Over the same period, however, year-to-date home sales increased 14 percent in Louisville and 2 percent in Little Rock. Residential construction continued to improve throughout the District. August 2010 year-to-date single-family housing permits were up in most District metro areas compared with the same period in 2009. Permits increased 14 percent in Little Rock, 15 percent in St. Louis, and 16 percent in Memphis. In contrast, single-family housing permits decreased 4 percent in Louisville.
Activity in commercial real estate and construction remained slow throughout most of the District. Contacts in Louisville reported that the office market remained soft and there is low demand for commercial real estate loans. While a contact in central Arkansas reported some improvement in commercial property sales, a contact in northeast Arkansas noted that commercial construction remains at a virtual standstill. Industrial real estate and construction was mixed throughout the District, with some regions showing signs of improvement. A contact in west Tennessee noted industrial development projects that are expected to aid business activity in the area. A contact in Evansville, Indiana, reported that there seems to be more "quoting" on major construction, but no real jobs are starting. In contrast, contacts in the west Kentucky region reported construction projects primarily related to health and hospitality. Contacts in St. Louis noted limited industrial construction projects.
Banking and Finance
Total loans outstanding at a sample of small and mid-sized District banks decreased 1.8 percent in the three-month period from mid-June to mid-September. Real estate lending, which accounts for 73.2 percent of total loans, decreased 2.2 percent. Commercial and industrial loans, accounting for 16.1 percent of total loans, decreased 1.6 percent. Loans to individuals, accounting for 5.1 percent of loans, decreased 7.9 percent. All other loans decreased 8.5 percent and accounted for 5.6 percent of total loans. Over this period, total deposits increased 0.3 percent.
Agriculture and Natural Resources
Recent dry weather throughout most of the District provided excellent conditions for harvesting crops, although many parts of the District have subsequently faced moderate or severe drought conditions. At the beginning of October, the overall corn, soybean, sorghum, cotton, and rice harvests were ahead of their normal paces by 28 percent to 137 percent. Since our previous report, overall crop conditions deteriorated slightly for corn but remained similar or improved slightly for soybeans, cotton, and sorghum. Yield estimates for corn and tobacco in all District states that grow these crops and for soybeans, cotton, and sorghum in most District states that grow these crops declined from August to September. The remaining yield estimates, including those for rice, stayed the same or increased slightly.
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