January 15, 2003
Federal Reserve Districts
|Skip to content
Contacts indicate that economic activity in the Eighth District softened in recent weeks. In manufacturing, reports of plant closings, layoffs, and cutbacks have increased. Retailers report that holiday sales were below expectations despite heavy discounting; the reduced consumer spending was attributed to a shortened shopping season, bad weather, and a weak economy. Home sales are still up in most of the District, and commercial real estate markets continue to be sluggish. Loan demand at small and midsized District banks rose in the fourth quarter of 2002.
Manufacturing and Other Business Activity
Early reports of retail sales indicate that most retailers' expectations for holiday spending were not met, despite heavy discounting. Purchases by post-Christmas bargain-hunters may help increase profits but are not expected to close the gap appreciably. Though they continued to fare better than general retailers, discount stores also saw holiday sales fall below expectations. Among the strong sellers were toys, entertainment, and home items, while adult apparel did not sell as well. Contacts attributed the reduced consumer spending to a shortened shopping season, inclement weather in some parts of the District, and a weak economy. Several contacts note that retailers will continue discounting merchandise. Contacts in the trucking industry report that demand is steady, although fluctuations in fuel prices are affecting profit margins. The increasing cost of health-care insurance, driving up labor costs, continues to be a concern across all industries.
Real Estate and Construction
Commercial real estate markets continue to be sluggish in most of the District. Memphis reported negative absorption in the third quarter of 2002, with abundance of sublease space and increasing vacancy rates. In Louisville, the midyear vacancy rate increased compared with midyear 2001. In St. Louis, the market ended 2002 with positive absorption. Commercial construction opportunities are mixed. Construction activity has been slow in northeast Arkansas. Contacts in Tennessee reported an increase in nonresidential work in November over the same month last year; however, they also indicated a bleak outlook for commercial construction. In central Kentucky, construction of hospitals, churches, and college facilities remains strong.
Banking and Finance
Agriculture and Natural Resources