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The economy of the Eighth District grew at a modest pace since our previous survey. Manufacturing activity has increased since the previous report and activity in the services sector has also increased. Residential real estate activity, in contrast, has continued to decline. Commercial and industrial real estate activity has been sluggish, although contacts noted improvement in some areas. Overall lending at a sample of small and mid-sized District banks declined slightly in the three-month period from mid-September to mid-December.
Manufacturing and Other Business Activity
Manufacturing activity has increased 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 decrease operations. Firms in the industrial gas, metallic component, automotive parts, primary metal, and clothing manufacturing industries announced plans to increase operations and hire new workers. In contrast, firms in the speaker component, medical equipment, furniture, and dye manufacturing industries announced plans to decrease operations and lay off workers.
Activity in the District's services sector has increased since our previous report. Firms in distribution services, consulting services, and health services announced plans to expand operations and hire new workers. Several general retail contacts in the District reported stronger holiday sales compared with last year. District auto dealers reported strong sales of luxury automobiles and pickup trucks.
Real Estate and Construction
Home sales continued to decline throughout most of the Eighth District. Compared with the same period in 2010, November 2011 year-to-date home sales were down 3 percent in Memphis, 4 percent in St. Louis, 5 percent in Louisville, and 7 percent in Little Rock. Residential construction also continued to decrease throughout the District. November 2011 year-to-date single-family housing permits decreased in the majority of the District's metropolitan areas compared with the same period in 2010. Permits decreased 1 percent in Memphis, 17 percent in Louisville, and 21 percent in Little Rock and St. Louis.
Commercial and industrial real estate activity was slow throughout most of the Eighth District. Contacts in central Kentucky reported that commercial real estate activity continues to be sluggish, while contacts in central Arkansas reported soft demand for commercial real estate loans. Contacts in Louisville noted that the health care industry is providing most of the current demand for office spaces. Commercial and industrial construction activity remained unchanged throughout most of the District. Contacts in south-central Kentucky reported that construction activity is modest but noted new commercial construction projects in the Scottsville and Bowling Green areas. Contacts in St. Louis reported continued limited construction, while contacts in Louisville noted that speculative development has still not recovered. Contacts in western Kentucky reported that construction firms are experiencing little activity with the exception of government-related projects.
Banking and Finance
Total loans outstanding at a sample of small and mid-sized District banks decreased 0.2 percent in the three-month period from mid-September to mid-December. Real estate lending, which accounts for 73.4 percent of total loans, decreased 0.5 percent. Commercial and industrial loans, accounting for 15.5 percent of total loans, decreased 0.2 percent. Loans to individuals, accounting for 4.7 percent of loans, increased 2.0 percent. All other loans, accounting for 6.4 percent of total loans, increased 8.0 percent. Over this period, total deposits increased 0.3 percent.
Agriculture and Natural Resources
As of the beginning of December, the number of bales of cotton ginned (separated from the seed) in the District states was up by 11.9 percent over the same period in 2010. Monthly output of commercial red meat for October 2011 increased compared with September 2011 and October 2010. However, the District's total live weight and number of young chickens slaughtered decreased between September and October 2011. The District's monthly coal production for November 2011 was 2.7 percent lower compared with November 2010; however, the District's year-to-date coal production at the end of November 2011 was 2.8 percent higher than the same period in 2010.
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