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Federal Reserve Districts

Eighth District--St. Louis

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Economic activity in the Eighth District continued to expand since our previous survey. A majority of manufacturing contacts reported plant openings, expansions, and new hires. The services sector continued to expand. Retail sales increased in November and early December compared with last year's levels. Reports of auto sales were mixed. Residential real estate activity continued to increase, and commercial activity showed additional signs of improvement, especially in construction. Total loans at a sample of small and mid-sized District banks increased from late September to early December.

Manufacturing and Other Business Activity
Manufacturing activity in the Eighth District has improved in many areas since our previous report, with a majority of firms reporting plant openings, facility expansions, and new hires. Several firms in the packaging materials, printing, primary metal, nonmetallic minerals, machinery, software, transportation equipment, and automotive parts industries reported plans to open new plants and expand production facilities in the District, which will likely result in more than 660 new jobs. Other firms in the machinery, transportation, primary metal, chemical, motor vehicle, automotive parts, fabricated metal product, and food industries reported plans to increase capital investment and hire as many as 880 new workers. Counteracting these improvements somewhat, several District manufacturers reported plant closings and workforce reductions. Firms in the fabricated metal product, wood product, chemical, and apparel industries will close plants and lay off employees, displacing as many as 1,290 workers.

The District's service sector continues to improve in most areas. Firms in the business support, freight transportation, insurance, airport operations, traveler accommodation, recreation, and employment services industries reported new facility openings and expansions, likely resulting in more than 500 new jobs. In contrast, a firm in the credit intermediation industry reported plans to eliminate 200 jobs due to a nationwide industry slowdown. District retailers generally reported increased sales in November and early December compared with the same months last year. Electronics and clothing were among strong-selling items. Auto dealer reports have been mixed, with new vehicle sales slowing as used vehicle sales continue to increase.

Real Estate and Construction
Home sales in the Eighth District continued to do well in November. November year-to-date sales increased by 14.8 percent in Memphis, compared with the same period in 2003. The increase was 6.6 percent in Louisville, 12.8 percent in southern Indiana, and 3.3 percent in the greater St. Louis area. November year-to-date housing starts grew by 6.7 percent in Memphis and fell by 11.7 percent in the Tupelo region compared with the same period in 2003. November year-to-date single-family housing permits were up in most of the District's metropolitan areas compared with the same period last year; in the St. Louis metropolitan area, permits increased by 12.5 percent. Contacts in northeast Arkansas reported that residential construction in November was very strong.

Commercial real estate markets at the end of the year seemed to be strengthening throughout the District. The St. Louis metropolitan area's year-end office vacancy rate fell to 16.0 percent, compared with 17.5 percent at the end of 2003, while the industrial vacancy rate fell to 5.6 percent from 7.4 percent in 2003. Contacts in Memphis expect commercial real estate activity to pick up in 2005. Commercial construction continued to show some improvement in most of the District. Contacts in west Tennessee report that commercial construction has improved and government construction has increased considerably. Contacts in northeast Arkansas indicate that commercial construction was active, but not as strong as residential activity. Commercial development remained at a record high through November in the Tupelo region, with a year-to-date increase of 20.3 percent in new commercial space built, compared with November 2003.

Banking and Finance
Total loans outstanding at a sample of small and mid-sized District banks increased 3.2 percent from late September to early December. This increase stems from a 3.4 percent rise in real estate loans along with a 4.4 percent rise in commercial and industrial loans. Loans to commercial banks also contributed to the overall increase, with a growth of 118.8 percent. Loans to individuals continued to decline, dropping by 2.3 percent. Over the same period, total deposits at these banks increased 4.8 percent.

Agriculture and Natural Resources
A major snowstorm hit parts of the District in late December. Moderate temperature and rainfall have since melted the snow but left behind muddy fields and pastures. Since November, there have been confirmed cases of Asian soybean rust--a fungus that reduces yield--in a few counties along the Mississippi River in Missouri, Tennessee, and Arkansas. Its effect on next year's crop remains uncertain. Farmers report that the winter wheat crop is mostly in fair or good condition. December coal production in the District states was about 4 percent higher than a year ago. Coal production during 2004 increased by about 10 percent compared with 2003.

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Last update: January 19, 2005