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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