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Economic activity in the Eighth District has continued to increase at a modest pace since our previous report. Manufacturing activity has continued to increase since the previous report. Activity in the services sector also has increased. Residential real estate activity has continued to decline. In contrast, commercial and industrial activity has improved modestly in some areas, although commercial construction activity has remained slow. Lending at a sample of small and mid-sized District banks declined in the three-month period from late March to late June.
Manufacturing and Other Business Activity
Manufacturing activity has continued to increase 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 reduce operations. Firms in the wood, organic dye, automobile parts, lime, and hygiene product manufacturing industries reported plans to expand operations and hire new workers. Furthermore, a major firm in the automobile manufacturing industry announced plans to hire a significant number of new workers. In contrast, firms in the ice cream, air conditioner, and wrapping paper manufacturing industries announced plans to close plants and lay off employees.
Activity in the District's services sector has increased since our previous report. Firms in the business support, human resources administration, entertainment, hotel, and tire wholesale industries announced plans to expand operations and hire new workers. In contrast, contacts in the government, newspaper publishing, restaurant, and education industries reported plans to decrease operations in the District and lay off employees. General retailers report that sales have slowed in recent weeks. Auto dealers report inventory shortages of quality used cars as well as new car models that contain parts supplied by Japan.
Real Estate and Construction
Home sales continued to decline throughout most of the Eighth District. Compared with the same period in 2010, May 2011 year-to-date home sales were down 15 percent in Louisville, 13 percent in Memphis, and 21 percent in Little Rock and St. Louis. Residential construction also continued to decline throughout the District. May 2011 year-to-date single-family housing permits decreased in the majority of the District metro areas compared with the same period in 2010. Permits decreased 30 percent in Little Rock, 34 percent in St. Louis, 23 percent in Memphis, and 27 percent in Louisville.
Commercial and industrial real estate activity has experienced modest improvement in some regions, while construction activity remained slow throughout most of the District. A contact in central Arkansas reported that while office real estate activity continues to be stagnant, there are more commercial space inquires from national tenants. A contact in Memphis noted a slight increase in office space demand in the first half of 2011 but noted unchanged activity for industrial real estate. Contacts in St. Louis noted demand growth for both industrial and office space but slow construction activity. Contacts in Louisville reported increased industrial space leasing activity and expect further demand growth in this sector as new construction remains limited. Contacts in northeast Arkansas noted growth in commercial real estate sales and construction in the Jonesboro and Paragould areas.
Banking and Finance
Total loans outstanding at a sample of small and mid-sized District banks decreased 1.0 percent from late March to late June. Real estate lending, which accounts for 74.3 percent of total loans, decreased 1.4 percent. Commercial and industrial loans, accounting for 15.6 percent of total loans, increased 0.8 percent. Loans to individuals, accounting for 4.7 percent of total loans, decreased 6.0 percent. All other loans, roughly 5.4 percent of total loans, increased 13.6 percent. During this period, total deposits at these banks decreased 0.5 percent.
Agriculture and Natural Resources
The majority of the corn, soybean, sorghum, rice, and cotton crops in the Eighth District are currently in fair or better condition. Winter wheat harvests are either complete or close to completion in all District states, and the production of winter wheat and the area harvested for the crop increased from 2010 to 2011. Finally, the fraction of pastures in good or better condition has declined in most District states since our previous report. Year-to-date coal production for the District, at the end of June, was 6.1 percent higher than the same period in 2010, and monthly production for June was 1.3 percent higher than production for June 2010.