The district economy continued to grow moderately the past month, while showing a few signs of easing. Manufacturing activity remained fairly strong and retail sales edged up. Construction activity was generally unchanged, while energy activity declined slightly. In the farm economy, good results have been reported for the completed fall harvest, the winter wheat crop appears to be in good conditions, and ranchers face favorable feeder cattle prices. Labor markets remained tight in much of the district, with limited evidence of wage pressures. Prices generally held steady at the retail level, while increasing slightly for some construction and manufacturing materials.
Retailers report sales increased last month and were slightly higher than a year ago. Retailers are optimistic that sales will increase over the holiday season. Most retailers were satisfied with current stocks but expect inventories to decline slightly according to seasonal patterns. Automobile dealers report sales were generally unchanged last month and slightly lower than a year ago. Sales of light trucks and sport utility vehicles remained strong. Dealers have been expanding inventories slightly as they expect sales to improve somewhat in the coming months.
Manufacturers continued to operate at moderately high levels of capacity last month. Manufacturing materials were generally available, with lead times holding steady for most items and increasing somewhat for a few others. Inventories edged down last month and no major changes are expected in coming months. A quarterly survey of district manufacturers indicated that production, shipments, and new orders all increased at a healthy rate from September to October.
Builders report housing starts generally held steady last month and were unchanged from a year ago. Builders anticipate a normal seasonal slowdown in construction activity in the coming months. Sales of new homes edged down. Most building materials were readily available and delivery times were normal. Mortgage lenders report slightly higher demand last month but expect demand to slacken in coming months.
Bankers report that loans increased and deposits remained unchanged last month, raising loan-deposit ratios slightly. Consumer loans, home equity loans, home mortgages, and residential construction loans all increased, while other loan categories were little changed. Increases in demand deposits, money market deposit accounts, and large CDS were offset by a decline in small time deposits.
Almost all respondent banks left their prime lending rates unchanged last month and expect to hold rates steady in the near term. Most banks did not change their consumer lending rates and anticipate no future changes. Some banks tightened their lending standards, citing concerns over credit quality or the economic outlook.
District energy activity declined slightly for the second consecutive month but remained somewhat stronger than a year ago. Crude oil and natural gas prices increased last month, but both prices remained below the peaks reached at the end of last year. The district rig count fell 6 percent in October to a level 8 percent higher than a year ago.
The fall harvest was completed with average to slightly above average yields for corn and soybeans reported in most areas. The district's winter wheat crop appears to be in good condition and was not affected by the recent snowstorm. Likewise, winter wheat pasture is expected to be plentiful and of good quality this season. Feeder cattle prices remain strong and ranchers are earning healthy profits. Prices for fed cattle have edged up recently and feeders are making modest profits. Hog production in the district is profitable, and has been expanding significantly. Although hog prices have dropped seasonally in recent weeks, strong exports have kept prices at profitable levels.
Main street businesses in the district are benefiting from the health of the farm economy. District bankers indicate that the rural businesses are experiencing slightly higher profits than a year ago.
Wages and Prices
Labor markets remained tight last month in much of the district, with some limited evidence of wage pressures. Retailers report short supplies of entry-level and clerical workers, and manufacturers say skilled workers, such as engineers, were hard to find. A few companies say they raised wages more than normal to attract or retain workers, but many say wage increases were about normal. Prices held steady at the retail level but increased slightly for some manufacturing and construction materials. Retailers expect no major price changes in coming months.