April 23, 2003
Federal Reserve Districts
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Contacts indicate that economic activity in the Eighth District has remained soft in recent weeks. In manufacturing, there are continued reports of plant closings, layoffs, and cutbacks. Retailers report that sales were relatively flat compared with last year and attribute sluggish consumer spending to colder weather and a late Easter, but some are optimistic about spring sales. Home sales are still up in most of the District, while commercial real estate markets continue to be sluggish. Total loan demand at small and mid-sized District banks has weakened throughout the first quarter of 2003.
Manufacturing and Other Business Activity
General retail sales in the District were mostly flat in March compared with 2002 levels. Some contacts note that colder weather and a late Easter are to blame. Several are optimistic about spring sales. Auto dealers report that, while March sales were an improvement from February, they were still down from March 2002 levels, despite the continuation of aggressive incentives. Contacts in the trucking industry note that profits shrank because of March's increase in fuel prices. To reduce costs, the airline industry has announced more cutbacks, which will affect employment in the District.
Real Estate and Construction
Commercial real estate markets are still sluggish in most of the District. Contacts reported an increase in vacancy rates in the office and industrial markets in downtown St. Louis for the fourth quarter of 2002. Office vacancy rates also continued to increase in Louisville. A recovery in the Memphis area office market is not expected until mid-year 2003. Commercial construction is still slow in most areas. Contacts in Pine Bluff reported that several projects are in process at area colleges but that the prognosis for future funding is bleak. Commercial construction is lagging in Memphis, while there has been an increase in small construction projects in central Kentucky.
Banking and Finance
Agriculture and Natural Resources
Planting intentions for soybeans and wheat declined on average, while prospective corn, cotton, and sorghum plantings increased. In Mississippi, Kentucky, and Arkansas, farmers planted between 13 percent and 40 percent less winter wheat in 2002 to 2003 than in 2001 to 2002. Contacts say that this decline is due to wet fall weather that inhibited planting. In Illinois and Indiana, wheat plantings increased 18 percent and 29 percent, respectively, possibly marking the beginning of a turnaround from declining plantings since 1996. Farmers who were unable to plant wheat in the fall may well plant other crops this spring; corn planting intentions increased by 8 percent on average, while prospective cotton and sorghum plantings increased 7 percent and 9 percent respectively.