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U.S. Federal Reserve Beige Book: St. Louis District (Text)

The following is the text of the Federal Reserve Board’s Eight District-- St. Louis.

Eighth District - St. Louis

Summary

Economic activity in the Eighth District has expanded at a moderate pace since our previous survey. Recent reports of planned activity from manufacturing and services contacts have been positive. Residential real estate market conditions have continued to improve moderately, while commercial and industrial real estate market conditions have continued to be mixed. Overall lending activity at a sample of small and mid-sized District banks increased slightly from mid-June to early September. Agricultural conditions in the District have generally improved since our previous report.

Manufacturing and Other Business Activity

Reports of plans for manufacturing activity have been positive since our previous report. Several manufacturers reported plans to hire new employees, open new plants, or expand operations, while fewer manufacturers reported plans to lay off workers or close plants. Firms in poultry processing, furniture, commercial printing, boat, conveyor equipment, HVAC equipment, and industrial gas manufacturing plan to hire new workers, open new facilities, or expand current operations. In contrast, firms that manufacture iron and steel products, mining equipment, and food products plan to lay off workers or close existing facilities.

Reports of planned activity in the District’s service sector have been positive since our previous report. Firms in business support, distribution, healthcare technology, and personal care reported plans to hire new workers or expand operations. A transportation services firm also announced large-scale hiring plans for seasonal employees recently. In contrast, a financial services firm announced plans to relocate workers to a new location outside the District. Lastly, auto dealers in certain parts of the District reported weak hybrid vehicle sales.

Real Estate and Construction

Home sales increased throughout most of the Eighth District on a year-over-year basis. Compared with the same period in 2011, August 2012 year-to-date home sales were up 15 percent in Louisville, 6 percent in Little Rock, 11 percent in Memphis, and 17 percent in St. Louis. Residential construction increased in the majority of the District. August 2012 year-to-date single- family housing permits increased in the majority of the District metro areas compared with the same period in 2011. Permits increased 41 percent in Louisville, 27 percent in Little Rock, 39 percent in Memphis, and 17 percent in St. Louis.

Commercial and industrial real estate conditions were mixed throughout most of the District. A contact reported that apartment occupancy rates in northwest Arkansas remained high in Rogers, Bentonville, Fayetteville, and Springdale and strong multi-family real estate activity is expected in the second half of 2012. A contact in Louisville reported that office leasing activity declined in the central business district, while it remained strong in the suburban area. A contact in Memphis reported that industrial real estate activity has improved. Commercial and industrial construction activity improved throughout most of the District. A contact in Little Rock reported several new office building construction projects in the Fayetteville metropolitan area. A contact in Louisville reported that with demand for multi-family units remaining strong, plans for apartment construction continued to increase. A contact reported new mixed-use development plans in the Memphis metropolitan area.

Banking and Finance

Total loans outstanding at a sample of small and mid-sized District banks increased 1.4 percent from mid-June to early September. Real estate lending, which accounts for 73.3 percent of total loans, increased 0.2 percent. Commercial and industrial loans, accounting for 15.8 percent of total loans, increased 1 percent. Loans to individuals, accounting for 4.7 percent of total loans, increased 2.5 percent. All other loans, accounting for 6.2 percent of total loans, increased 16.4 percent. During this period, total deposits at these banks increased 0.2 percent.

Agriculture and Natural Resources

The condition of pastureland in the Eighth District has improved significantly from early August to late September. Excluding Mississippi, where 97 percent of pastureland was already rated as fair or better, the fraction of pastureland in fair or better condition has increased by at least 20 percentage points in all District states. The share of crops in fair or better condition has similarly increased across the District, although the condition of the corn crop remains relatively unchanged. Harvest completion rates have outpaced their 5-year averages for almost all crops in all District states. In particular, harvest completion rates for corn and rice are on average 30 percentage points ahead of their 5-year averages. Total year-to-date coal production in the states comprising the District, with the exception of eastern Kentucky, was 9 percent higher through the end of August than it was in the first eight months of 2011. August production, however, was 6.8 percent lower than in August 2011.

SOURCE: Federal Reserve Board

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