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The economy of the Eighth District has continued to expand at a moderate pace since our previous report. Manufacturing activity has continued to increase since the previous report, while activity in the services sector has declined. Retail sales increased in April and early May over year-earlier levels. Similarly, auto sales increased over the same period. Residential real estate activity has continued to decline, and commercial and industrial real estate market conditions have been mixed. Overall lending at a sample of large District banks saw little change during the first quarter of 2011 compared with the fourth quarter of 2010.
Contacts reported that retail sales in April and early May were up, on average, over year-earlier levels. About 48 percent of the retailers reported increases in sales, while 36 percent saw decreases and 16 percent saw no changes. Roughly 41 percent of the retailers noted that sales levels were below their expectations, 35 percent reported that sales met expectations, and 24 percent reported that sales were above expectations. About 32 percent of the retailers noted that their inventories were too high, while 20 percent reported that their inventories were too low. The sales outlook for June and July was mostly optimistic: About 60 percent of the retailers expect sales to increase over 2010 levels, while 24 percent expect sales to decrease and 16 percent expect sales to be similar to last year.
Car dealers in the District reported that sales in April and early May were up, on average, compared with last year's sales. About 58 percent of the car dealers surveyed saw increases in sales, while 29 percent saw decreases and 13 percent saw no changes. About 38 percent of the car dealers noted that used car sales had increased relative to new car sales, while 21 percent reported the opposite. Also, about 29 percent of contacts reported an increase in sales of low-end vehicles relative to high-end vehicles, while less than 4 percent reported the opposite. About 57 percent of the car dealers surveyed reported that their inventories were below desired levels, while 9 percent reported that their inventories were too high. The sales outlook for June and July was generally optimistic: About 58 percent of the car dealers expect sales to increase over 2010 levels.
Manufacturing and Other Business Activity
Manufacturing activity has continued to increase since our previous report. Several manufacturers reported plans to open plants and expand operations in the near future, while a smaller number of contacts reported plans to close plants or reduce operations. Firms in the tire, powder coating, food, paper, packaging, machinery, automobile, and ship manufacturing industries reported plans to expand existing operations and hire new workers. In contrast, a firm in paper manufacturing announced plans to close a plant and lay off employees. Additionally, some automobile manufacturers have reduced their production because of a shortage of parts sourced from Japan.
Activity in the District's services sector has declined since our previous report. Numerous casinos in the District have been forced to temporarily close because of flooding on the Mississippi River. Additionally, contacts in the telephone call center, health care, business support, and support activities for transportation industries reported plans to decrease operations in the District and lay off employees. In contrast, a contact in the nursing care industry announced plans to expand operations and hire new workers.
Real Estate and Construction
Home sales continued to decline throughout most of the Eighth District. Compared with the same period in 2010, April 2011 year-to-date home sales were down 11 percent in Louisville and Memphis and 19 percent in St. Louis and Little Rock. Residential construction also continued to decrease throughout the District. April 2011 year-to-date single-family housing permits decreased in the majority of the District metro areas compared with the same period in 2010. Permits decreased 33 percent in Little Rock, 42 percent in St. Louis, and 25 percent in Memphis and Louisville.
Commercial and industrial real estate market conditions were mixed. Compared with the fourth quarter of 2010, first quarter 2011 suburban office vacancy rates increased in St. Louis, decreased in Little Rock and Louisville, and remained constant in Memphis. The downtown office vacancy rates increased in Louisville and St. Louis, decreased in Memphis, and stayed the same in Little Rock. Industrial vacancy rates decreased for Louisville, Memphis, and St. Louis but increased for Little Rock. Commercial and industrial construction activity remained slow throughout most of the District. Contacts in Little Rock noted that commercial construction has remained fairly weak. Contacts in St. Louis and northwest Arkansas also noted weak commercial construction activity. In contrast, some contacts in southwestern Illinois and Kentucky noted that overall construction has increased recently.
Banking and Finance
A survey of senior loan officers at a sample of large District banks indicates little variation in overall lending activity in the first quarter of 2011 relative to the fourth quarter of 2010. During this period, credit standards for commercial and industrial loans remained unchanged, while demand for these loans ranged from unchanged to moderately stronger. Credit standards for commercial real estate loans were unchanged, while demand ranged from unchanged to moderately weaker. Meanwhile, credit standards for consumer loans remained unchanged, while demand ranged from about the same to moderately stronger. Credit standards for residential mortgage loans ranged from unchanged to somewhat tighter, while demand ranged from moderately weaker to moderately stronger.
Agriculture and Natural Resources
Heavy rain and flooding on the Mississippi River during April and early May slowed down field work and affected crop conditions in the District. The rates of completion for the planting of corn, cotton, rice, sorghum, and soybeans were behind their 5-year average in most District states; crop emergence was generally behind schedule as well. At least 67 percent of the winter wheat crop was rated in fair or better condition across the District states. Similarly, 88 percent or more of pastures were rated in fair or better condition. Monthly coal production for April 2011 was 2.6 percent lower compared with April 2010.