| Skip to content
|
District contacts, while still reporting tight labor markets in their communities, are seeing some moderation in the rate of economic growth. Retail contacts expressed satisfaction with November sales activity and are generally optimistic about the holiday season. The latest Manpower survey suggests a slight pullback in hiring plans for the first quarter of 1999 compared with a year earlier. Housing markets remain strong, although growth in new construction has been waning. Nonresidential construction has slowed across the District. While loan demand remains strong at large District banks, several bankers report a modest tightening of loan standards for corporate borrowers. Farm sector contacts report that low commodity prices have significantly pared sales of farm machinery and agricultural chemicals compared with a year earlier.
Consumer Spending
General retailers report that year-over-year sales growth averaged 4 percent in November a result that generally met expectations. Most of those surveyed indicated that their inventories were at desirable levels or just a little bit high. Contacts report that balmy weather throughout the District kept many shoppers out of the malls the weekend after Thanksgiving, although the effect on sales figures has not yet been tabulated. Nevertheless, retailers are optimistic about this year's holiday season and most are positive when looking toward the new year.
Automobile dealers said sales growth was about 5 percent on average for November when compared with a year earlier. Almost all of the dealers indicated that they are currently, and plan to continue, using sales incentives, and most are content with their current inventory levels. Some dealers are very optimistic about sales in the first quarter of 1999 but, in general, dealers anticipate only modest sales growth.
Manufacturing and Other Business Activity
District contacts remain optimistic about economic conditions. Although they believe the overall pace of activity has slowed somewhat, contacts also see an economic resilience that's being bolstered by strong housing markets and stable consumer spending. Employers note that their continuing difficulty filling vacancies is a sign that tight labor markets have not really turned around yet. Still, reports of unusually high wage increases because of the labor market situation are scarce. For the most part, businesses related to home construction and home improvement are experiencing strong orders and sales. The furniture industry, for example, continues to receive a steady stream of new orders. A contact who provides custom interior architectural design has also seen strong sales lately. Transportation companies have seen some pickup, too. One railroad company is embarking on a long-term plan to boost capacity and employment. Foreign sales for some companies, however, have almost dried up. Weak Asian economies have affected industries like poultry and lumber.
Labor Outlook
According to the latest Manpower survey of businesses in the four major Eighth District cities, firms are expected to tone down their hiring plans during the first three months of 1999 compared with a year earlier. On average, the percentage of firms expected to add to their payrolls in the first quarter of 1999 exceeds by 8 percentage points the portion expected to pare their workforces. This net increase averaged 19 percentage points three months earlier and 9 percentage points a year earlier. Hiring prospects are the most upbeat in Little Rock and St. Louis, with somewhat less optimism expressed in Louisville.
Real Estate and Construction
Although there has been some slowing in monthly permit issuance for residential construction, year-to-date permits are up in almost all of the District's 12 metropolitan areas. Sales of new and existing homes remain strong, and median prices (year-over-year) continue to increase. Nonresidential construction, however, has tapered off. Short of some major projects already in the works, most nonresidential builders are taking a "wait and see" approach.
Banking and Finance
Several senior loan officers in the District report that they have recently tightened standards for approving commercial and industrial (C&I) loans to all sizes of corporate borrowers. The officers cite a less favorable or more uncertain economic outlook and a worsening of industry-specific problems as reasons for the modest tightening. Demand for C&I loans is still reported to be strong, as is demand for residential mortgage loans. Consumer loan demand is reportedly unchanged from three months earlier.
Agriculture and Natural Resources
The fall harvest is nearly complete in all areas. Surveys and anecdotal reports indicate that yields on the District's corn crop were well above last year's in most areas. For the most part, soybean yields are off slightly from a year earlier. In the southern portions of the District, an unusually dry growing season reduced cotton yields measurably; combined with fewer harvested acres, total crop production in Arkansas, Mississippi, Missouri and Tennessee is expected to drop 25 percent from a year earlier. Reports from contacts in Arkansas and Mississippi suggest that sales from chemical and farm implement dealers are down markedly from a year earlier because of low commodity prices. Reduced demand from Asian markets has caused a substantial cut in wood chip production. Moreover, pulp prices are reportedly the lowest in a decade.
|
Chicago