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Economic activity in the Eighth District has continued to expand at a modest pace since the previous survey. Manufacturing activity has continued to increase, and activity in the services sector has also increased. Residential real estate activity has continued to decline, while commercial real estate market conditions have been mixed. Overall lending at a sample of large District banks saw little change during the fourth quarter of 2011.
Consumer Spending
Contacts reported that retail sales in January and early February were up slightly, on average, over year-earlier levels. Half of the retailers saw increases in sales, while 37 percent saw decreases and 13 percent saw no changes. Roughly 71 percent of the retailers reported that sales levels met their expectations, 17 percent reported that sales were below expectations, and 12 percent reported that sales were above expectations. About 21 percent of the retailers reported that their inventories were too high, while 12 percent reported that their inventories were too low. The sales outlook for March and April was mostly optimistic: 65 percent of the retailers expect sales to increase over 2011 levels, while 13 percent expect sales to decrease and 22 percent expect sales to be similar to last year's sales.
Car dealers in the District reported that sales in January and early February were up slightly, on average, compared with last year's sales. About 48 percent of the car dealers surveyed saw increases in sales, while 32 percent saw decreases and 20 percent saw no changes. Twenty-eight percent of the car dealers reported that used car sales had increased relative to new car sales, while 24 percent reported the opposite. Thirty-two percent of contacts reported an increase in sales of low-end vehicles relative to high-end vehicles, while 8 percent reported the opposite. Thirty-two percent of the car dealers surveyed reported that their inventories were too low, while 24 percent reported that their inventories were too high. The sales outlook for March and April was mostly optimistic: 76 percent of the car dealers expect sales to increase over 2011 levels, while just 4 percent expect sales to decrease and 20 percent expect sales to be similar to last year's sales.
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 decrease operations. Firms in the furniture, automobile, food, stone product, air conditioning component, and medical device manufacturing industries announced plans to increase existing operations and hire new workers. Additionally, firms in the automobile parts and primary metal manufacturing industries announced plans to open new plants and hire workers. In contrast, firms in the faucet, chemical, paper product, and lawn mower manufacturing industries announced plans to close plants and lay off workers.
Activity in the District's services sector has continued to increase since our previous report. Firms in information technology services, pest control services, distribution services, health services, and leisure services announced plans to expand operations and hire new workers. In contrast, contacts in freight transportation services, education services, government services, and business support services announced plans to decrease operations and lay off workers.
Real Estate and Construction
Home sales continued to decline throughout most of the Eighth District. Compared with 2010, total 2011 home sales were down 2 percent in Memphis, 3 percent in St. Louis, 4 percent in Louisville, and 6 percent in Little Rock. Residential construction also continued to decrease throughout the District. Total 2011 single-family housing permits decreased in the majority of the District metro areas compared with 2010. Permits decreased 15 percent in Louisville, 20 percent in Little Rock, and 21 percent in St. Louis. However, permits increased 1 percent in Memphis.
Commercial and industrial real estate conditions were mixed throughout the Eighth District. Contacts in Memphis reported weak commercial real estate loan demand but stable industrial real estate activity. Contacts in Louisville reported that commercial real estate activity has increased since December 2011 while contacts in St. Louis noted an increase in fourth-quarter 2011 office and industrial vacancy rates compared with the third quarter of 2011. Commercial and industrial construction also varied throughout the District. Contacts in south central Kentucky noted that commercial construction is showing improved activity with recent business additions and relocations in the region. Contacts in western Kentucky, however, noted that construction projects are very scarce, with the exception of Owensboro-Daviess County, which has a significant number of public and private projects underway. Contacts in northwest Arkansas noted an increase in commercial building construction in the Bentonville area, while contacts in Little Rock continued to report overall weak construction activity.
Banking and Finance
A survey of senior loan officers at a sample of large District banks showed little change in overall lending activity during the fourth quarter of 2011. During this period, credit standards and demand for commercial and industrial loans remained unchanged. Credit standards for commercial real estate loans also remained unchanged. Demand for these loans ranged from unchanged to moderately stronger. Meanwhile, credit standards for consumer loans remained unchanged, while demand ranged from moderately weaker to about the same. Credit standards for prime residential mortgage loans ranged from unchanged to somewhat eased, while demand for these loans ranged from about the same to moderately stronger.
Agriculture and Natural Resources
Yields for corn, sorghum, hay, soybeans, and cotton were lower in 2011 compared with 2010, while yields for winter wheat, rice, and tobacco showed positive gains. Monthly output of commercial red meat for December 2011 decreased compared with November 2011; the District's total live weight and number of chickens slaughtered also decreased during the same period. The District's coal production for January 2012 was 1 percent lower compared with January 2011. Similarly, as of early February, year-to-date coal production was 4.2 percent lower than the same period in 2011.
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