|
The Eighth District economy
continues to grow at a steady pace. District
retailers report that sales were up about 4
percent in September and October over one
year ago, and most are expecting a strong
holiday season. Auto sales were mixed over
the same two-month period, but most
contacts expect a pickup through year�s end.
Most other contacts report continued growth
in their industries, although some have
noted a slowing in this growth. Labor
markets remain tight around the District.
Materials prices are generally stable to up
slightly. Real estate markets are strong in
most parts of the District. Loan demand,
particularly for business loans, remains
relatively strong. Farmers appear to have
had a good crop year, with prices and yields
generally above average.
Consumer Spending
Retail contacts report that September
and October sales were up about 4 percent
from one year ago. Toys, home
improvement products and women�s
apparel were the biggest sellers. Contacts
also report that their inventories are at
desired levels. Most are expecting a strong
holiday season, with electronic products,
toys and jewelry leading the way. Moreover,
most believe that the first quarter of 1997
will yield better sales than a year earlier.
Car dealers were split in their sales
reports for September and October. While
about half saw sales increase about 8
percent over the year before, the rest saw
sales decline about 10 percent. Rebates have
not been used any more than usual to move
product. Most dealers are optimistic about
sales prospects through year�s end, and are
even more upbeat about the first quarter of
1997.
Manufacturing and Other Business Activity
Most District contacts continue to
report growth at their firms and in their
industries. Hiring and keeping qualified
workers because of tight labor markets
remains a big concern for many companies.
One contact remarked that firms are having
particular difficulty finding qualified
workers because the skills needed today are
much more specialized than they were in the
early 1970s, when similar unemployment
rates existed.
Providers of transportation and
delivery services are growing in the District,
with both railroads and trucking firms
adding workers. Trucking companies
report that there is currently a severe
shortage of drivers. The food and beverage
industries also report sales and employment
growth, with poultry processing firms
adding workers and a beverage firm
reporting sales increases over last year.
Other firms, while still reporting
growth, have recently noted a slowing in this
growth. A chemicals company reports that
sales are still above last year�s, but they are
not as robust as they were a few months ago.
Die cast producers have also seen a slowing
in their volumes. A contact in the scrap
metal industry has noted a slowdown in the
steel industry�s rate of inventory increase,
perhaps portending a downturn in that
industry. The District�s apparel industry is
still contracting, with two more plants
closing because of foreign competition.
About 750 jobs will be lost in total.
Prices
Most firms report that materials
prices have been stable to up somewhat, but
any increases have generally not been
passed along to customers. Lumber,
aluminum and natural gas prices, in
particular, are reportedly higher, while
scrap steel prices have recently fallen.
Contacts also report nominal wage increases
of between 3 percent and 4 percent for the
coming year. One contact mentioned that
some large customers are requesting rebates
from suppliers in lieu of lower prices for
large contracts.
Real Estate and Construction
Residential real estate markets are
strong in most parts of the District. Prices
for both new and resale houses are rising.
Monthly residential construction permits in
September were up in only five of the
District�s 12 metropolitan areas. On a
year-to-date basis, permits were up in nine metro
areas. The three areas that were below last
year�s levels are all in the southern part of
the District. Nonresidential construction is
particularly strong in the southern part of
the District, especially in northwest
Mississippi. Parts of southern Illinois and
western Kentucky are also seeing strong
commercial construction.
Banking and Finance
Bankers across the District report
continued strength in loan demand,
especially on the commercial side. Credit is
described as plentiful by most District
contacts. Bankers in St. Louis and central
Kentucky report aggressive competition for
business loan customers. Some bankers
have noted a softening of consumer loan
demand and report being much more
cautious in extending consumer credit in
response to rising personal bankruptcies
and consumer debt loads.
Agriculture and Natural Resources
With the fall harvest winding down,
substantial rainfall during early- to mid-
November in several parts of the District
slowed the pace of activity to a near
standstill. Initial reports suggest that yields
were generally above average and, in some
instances, outstanding for most crops. For
example, Arkansas rice farmers expect
yields to surpass the all-time high set just
two years ago. Southern pine lumber mills
report that orders on a year-to-date basis
continue to outstrip last year�s pace by a
little more than 7 percent.
|
Chicago