November 27, 2002
Federal Reserve Districts
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Contacts in the Eight District report that economic conditions have been mixed. Manufacturing is showing increased closings, layoffs, and consolidations. There are, however, reports of expansion in the services sector. Contacts indicate that activity may be slow during the holiday season in the distribution and logistics industry. Total retail sales have declined slightly. Auto sales were down in September and October. Home sales were still up throughout the District, while the market for commercial real estate was still weak. Reports of demand for residential real estate loans were mixed, while demand for other loans declined moderately in the last three months. In agriculture, early reports suggest that yields and total output of corn, soybean, and cotton will fall from last year's levels.
Car dealers in the District report that sales were down in September and October, compared with the same months in 2001. Contacts attribute the fall in sales to poor consumer confidence, a sluggish economy, and the boost from past aggressive incentives cutting into current sales. Half of the dealers surveyed noted no change in the rate of acceptance or rejection rates of finance applications, one-fourth indicated tighter standards, and the remaining fourth noted softer standards. About half of the contacts reported inventories to be at desired levels, but over one-third noted that inventories are at slightly higher-than-desired levels. Most contacts continue to use financial incentives, and most dealers are cautiously optimistic about the remainder of 2002, expecting flat-to-moderate growth.
Manufacturing and Other Business Activity
Reports from the trucking industry indicate a large backlog of freight as a result of the West Coast dock strike in October. A few services companies are opening offices in the District for research and development, and one District distribution and logistics company has announced plans to expand operations. Some contacts have indicated, however, that a weak economy and the relatively fewer number of days between Thanksgiving and Christmas this year may affect holiday deliveries.
Real Estate and Construction
The commercial real estate market has not yet seen a turnaround in the District. In the Memphis area, the market continues to be sluggish. In the St. Louis area, commercial general contractors are reporting flat-to-negative revenue growth. Commercial real estate construction is still growing in northwestern Arkansas and is picking up slightly in western Kentucky. Commercial construction has slowed down in northeastern Arkansas and has declined in the St. Louis metro area.
Banking and Finance
Credit standards for commercial real estate loans remained mostly unchanged. The demand for commercial real estate loans, however, was reported to be moderately weaker.
Credit standards for residential mortgage loans also remained largely unchanged, but reports on growth of residential mortgage loans were mixed. Credit standards for credit card and consumer loans remained largely unchanged, as well, and the volume of consumer loans decreased moderately.
Agriculture and Natural Resources