March 9, 2005
Federal Reserve Districts
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Economic activity in the Eighth District showed continuing signs of modest growth. In manufacturing, several contacts reported plans to open plants and expand, while some other contacts reported plans to close plants and lay off employees. In the services sector, most contacts continue to report improving economic conditions and job growth. In the retail and auto sectors, sales were reported as flat or slightly down in January and February with respect to year-earlier levels. Residential real estate markets continue to be robust, while commercial real estate remains soft, albeit showing some signs of improvement. Lending conditions are largely unchanged.
Car dealers in the District reported that, compared with last year, sales in January and February were virtually unchanged, on average. About 42 percent of the car dealers surveyed reported decreases in sales, while 38 percent reported increases. About 45 percent of the car dealers who responded noted that used car and low-end sales had increased relative to new car and high-end vehicle sales. Approximately 22 percent of the contacts reported increased use of rebates, while 65 percent reported no change. About 42 percent of car dealers reported that their inventories were too high, with a few reporting that all types of cars have been affected by excess inventories. Three-quarters of the car dealers surveyed stated that they are optimistic about increased sales during the next two months.
Manufacturing and Other Business Activity
The District's service sector continues to improve in most areas. Contacts in the utilities, airport operations, recreation, traveler accommodation, food service, transportation and warehousing, medical laboratories, and educational services sectors reported new facility openings and expansions. Other firms in the business support, computer product, and technical services sectors reported plans to add new operations and hire as many as 255 workers. For example, one firm in the freight transportation industry plans to hire 200 new workers to meet increased demand in international markets. In contrast, several contacts in the educational services and health care sectors reported plans to lay off several hundred employees.
Real Estate and Construction
Commercial real estate markets continue to lag behind residential markets in most of the District but seem to be slowly strengthening. In Louisville, from the third to fourth quarter of 2004 the overall office vacancy rate declined from 19.5 percent to 19.2 percent and the industrial market also declined from 9.8 percent to 9.2 percent. In Memphis the year-end industrial vacancy rate closed 2004 lower at 18.4 percent. Commercial construction continues to do well in the District, with several new projects in Louisville. Contacts in Memphis also predict a strong 2005.
Banking and Finance
Agriculture and Natural Resources