July 30, 2003
Federal Reserve Districts
|Skip to content
Economic conditions in the Eighth District showed little improvement since our last report. Manufacturing activity remains weak, and plant closings, cutbacks, and layoffs remain commonplace. Retail and auto sales were flat to down in June from last year. In the services sector, airlines continue cost-cutting efforts. Residential real estate markets are still doing well, while commercial real estate markets remain soft. Total loan demand at a sample of small and mid-sized District banks increased 2.5 percent between mid-March and early July. Crops in the District are generally in good condition.
Manufacturing and Other Business Activity
Contacts report that June retail sales were down from a year earlier, below most retailers' expectations. They note that sales of big-ticket items and durable goods in particular have been moving slowly. However, contacts note that while sales are weak, floor traffic appears to be steady. June auto sales were flat to down compared with year-ago levels, as well. Most contacts report that inventories are somewhat high, and a few have noticed an increase in the rate of rejection of finance applications. The airline industry is facing the need to cut costs. One major carrier, in particular, recently announced plans to streamline operations and lay off approximately 2,000 employees in St. Louis. There are, however, a few bright spots in the services sector, as several companies are locating distribution centers in the District.
Real Estate and Construction
Commercial real estate markets are still sluggish in most of the District. The second-quarter industrial vacancy rate in Louisville was 21 percent. In the Memphis area, the office vacancy rate was 15 percent and the industrial vacancy rate was 20 percent for the first quarter of 2003, both higher than the same period in 2002. Contacts do not expect any significant improvement until 2004. Commercial construction has started to pick up in most of the District, but activity has slowed down in some areas because of severe storms. Danville, Kentucky, continues to be a bright spot, where construction in colleges, hospitals, and churches is doing very well. Contacts expect a small increase in activity in Evansville, Memphis, and northeast Arkansas.
Banking and Finance
Agriculture and Natural Resources
Arkansas, Illinois, and Missouri have harvested most of their winter wheat, though Indiana has harvested only 55 percent. Harvesting is behind, on average, 5 percent from last year. Most of the District's soybeans have emerged, though the percentage of the crops that are blooming is down, on average, 21 percent from a year ago. As of July 8th, the share of cotton that was squaring (i.e., in its early maturing stage) was down on average 10 percent; the share of cotton that was setting bolls (i.e., in its early flowering stage) was down on average 45 percent.