November 28, 2007
Federal Reserve Districts
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Economic activity in the Eighth District expanded more slowly in the period since our previous report. Retail and auto sales in October and early November were down, on average, compared with year-ago levels. While the services sector continued to expand, manufacturing activity softened. Home sales and residential construction continued to weaken throughout the District, but commercial real estate market conditions remained positive. Overall lending activity at a sample of District banks was mostly unchanged in the three-month period ending in October.
Car dealers in the District reported that, compared with last year, sales in October and early November were down, on average. About 52 percent of the car dealers surveyed reported a decrease in sales, while 32 percent reported an increase. About 24 percent of the car dealers noted that used car sales had increased relative to new car sales and 28 percent reported an increase in low-end vehicle sales relative to high-end vehicle sales. About 28 percent of the respondents reported recent increases in rebates and incentives. About 20 percent of the car dealers surveyed reported that their inventories were too high (mostly on trucks and sport utility vehicles), while 16 percent reported that their inventories were too low. About 60 percent of the car dealers expect increased sales over 2006 for the remainder of the year, and another 12 percent expect unchanged sales, but 28 percent expect decreased sales.
Manufacturing and Other Business Activity
The District's service sector continued to expand steadily in most areas since our previous report. Contacts in the business support services and health care industries reported plans to expand operations and hire additional workers in the District.
Real Estate and Construction
Commercial real estate market conditions were generally positive throughout the District. The third quarter 2007 industrial vacancy rate decreased from the second quarter rate in St. Louis, Louisville, and Little Rock, while Memphis's industrial vacancy rate increased slightly. During the same period, office vacancy rates decreased in St. Louis, Louisville, Little Rock, and Memphis. Contacts in Little Rock reported that the number of new commercial building permits for year-to-date September 2007 are more than double the number for the same period last year. Contacts in Memphis and Louisville reported a strong outlook for commercial construction projects, while a contact in Madison County, Tennessee, reported that new commercial construction permits were at their lowest level in three years.
Banking and Finance
At least 95 percent of the corn, 89 percent of the soybean, 94 percent of the sorghum, 98 percent of the cotton, and all of the rice in the District states have been harvested. Yield estimates for most crops in most District states stayed roughly the same between October and November, but yield estimates for soybeans and cotton in Tennessee decreased by more than 10 percent. Winter wheat planting was ahead of its normal pace, and each District state has planted at least three-fourths of its intended crop. Over 60 percent of the emerged winter wheat in each District state was in good or excellent condition.