|Skip to content
Business activity in the Eighth District continued to expand since our previous survey. Reports in manufacturing were generally positive. Contacts in the services sector continued to report increased economic activity. Retail sales increased in February and March compared with the same months in 2004. Car sales over the same period were flat or slightly up. Home sales in the District continued to increase while commercial real estate activity showed additional signs of improvement. Total loans at a sample of small and mid-sized District banks increased from early December to mid-March.
Manufacturing and Other Business Activity
Manufacturing in the Eighth District has shown signs of improvement since our previous report, although several manufacturers expressed concern about rising energy prices. Several firms in the primary metal, motor vehicle, plastics, and electrical equipment industries reported plans to open new plants in the District, which will likely result in more than 1,900 new jobs. In addition, other firms in the machinery and automotive parts industries reported plans to expand operations and hire several hundred workers. Despite generally positive reports, several District manufacturers announced plant closings and workforce reductions. Firms in the food manufacturing, automotive parts, plastics, chemical, and apparel industries will close plants and lay off employees, displacing as many as 1,350 workers. Many of these contacts reported that they plan to relocate operations abroad because of increased foreign competition.
The District's service sector continues to expand in most areas. Firms in the freight transportation, airport operations, traveler accommodation, warehousing, gambling, marketing, telecommunications, water supply, waste management, recreation, and educational services industries reported new facility openings, renovations, and expansions. District retailers generally reported strong sales in February and March compared with the same months in 2004, although several contacts expressed concern about rising fuel prices. Strong-selling products included discount and grocery items, clothing, furniture, and hardware. District auto dealers reported that sales were flat or slightly up compared with last year. Import, tractor, and used car dealers reported positive sales growth, while most contacts reported a continued decline in the demand for sport utility vehicles.
Real Estate and Construction
February year-to-date home sales rose in most of the Eighth District. January and February home sales increased by 2.8 percent in St. Louis compared with the same months in 2004. Home sales were up 5.2 percent in Memphis and 5.6 percent in Louisville over the same period. Residential construction is, however, weakening in most of the District. January and February single-family housing permits declined in most areas. Compared with the same months last year, permits fell over 5 percent in St. Louis and Memphis and fell 10 percent in Louisville and 14 percent in southern Indiana. In contrast, February year-to-date permits increased in nearly every area of Arkansas and were up 88 percent in Tupelo, Mississippi.
Commercial real estate markets in the District are still strengthening. There is a limited amount of new office construction throughout the District and office vacancy rates seem to be slowly declining. In Louisville, the 2004 year-end office vacancy rate was 18.7 percent, down from 19.4 percent in 2003. The overall commercial vacancy rate for the Jefferson-Bullitt County market in Kentucky was 19.2 percent in the fourth quarter of 2004, down from 19.5 percent in the third quarter. The St. Louis and Memphis industrial markets are showing signs of improvement. Contacts in Memphis, Little Rock, and Louisville reported that commercial construction is very active. In northeast Mississippi, January and February square footage in commercial development increased 252 percent compared with the same months in 2004. Contacts in Little Rock reported that January and February were quiet in terms of industrial development.
Banking and Finance
Total loans outstanding at a sample of small and mid-sized District banks increased 1.5 percent from early December to mid-March. Real estate lending rose 2.1 percent. Consumer and industrial loans rose 3.1 percent. Meanwhile, loans to individuals declined 3.4 percent. Over this period, total deposits at these banks increased 1.6 percent.
Agriculture and Natural Resources
Most District farmers are still preparing for planting their spring crops. Farmers in the District states anticipate planting 2 percent more acres of corn, 28 percent more acres of sorghum, 10 percent more acres of cotton, and 2 percent more acres of rice this year than they planted in 2004. In contrast, District farmers anticipate planting 2 percent fewer acres of soybeans and 26 percent fewer acres of tobacco than last year. A few soybean farmers in Illinois and Indiana (the two largest soybean-producing states in the District) plan to decrease their acreage because of concerns about the incidence of Asian soybean rust.