July 31, 2002
Federal Reserve Districts
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Economic activity in the District continues to recover. Manufacturers in a range of industries report plans to expand production and employment, and retailers report that sales improved somewhat in June and July. The residential real estate market continues to be strong throughout most of the District, particularly for low- and mid-priced homes. On the other hand, commercial real estate markets continue to be weak throughout the District. Although infrastructure construction remains steady, state-government fiscal problems are causing concern about the future. Loan demand was strong throughout the District in the second quarter, particularly for residential mortgages. In the agricultural sector, the recent wheat harvest was down significantly from last year and crop conditions are reported to be fair or good throughout most of the District.
Manufacturing and Other Business Activity
Retail sales have rebounded somewhat after a lackluster spring, which had been attributed to inclement weather. Accordingly, some retailers attribute the return of customers to the warm weather. While discount and moderate-priced stores continue to outperform other merchants, a number of these other merchants have posted sales that exceed expectations. Most layoffs in the retail sector are the result of cutting unnecessary or redundant positions. Automobile sales are a mixed bag as some dealers report strong sales while others have noted sales tapering off since May. Several dealers note that used and mid-range new cars remain relatively more popular.
Real Estate and Construction
Residential construction opportunities have improved over last year as May year-to-date building permits were higher than a year earlier for most of the District. Commercial construction opportunities are increasing in western Tennessee, although contacts in Arkansas and Kentucky report fewer projects for speculative space and more projects for space that has already been leased before construction. State-funded infrastructure projects continue to provide steady demand to the construction industry, although state-government fiscal problems are causing a great deal of concern.
Banking and Finance
Agriculture and Natural Resources
Topsoil moisture conditions are reported to be adequate in Mississippi, with the other District states, most notably Illinois, reporting less-than-adequate moisture conditions. On average, most crops in Arkansas, Kentucky, Mississippi, and Tennessee are in good condition while those in Indiana, Illinois, and Missouri are in fair condition. Among the latter group of states, there is widespread concern among farmers about their crops, particularly corn and soybeans. The dry soil conditions, in conjunction with the current adverse weather, stressed the late-planted corn crop and may have lowered potential yields in some areas. In addition, the lack of rain in the soybean producing areas has caused the price for this crop to increase markedly between mid-June and mid-July. The unfavorable dryness that persists in the northern parts of the District has also been causing pasture conditions to deteriorate, with conditions in Tennessee generally in the worst shape.