WASHINGTON (MNI) – The following is the Beige Book section on the
Federal Reserve’s Eight District, published Wednesday:

EIGHTH DISTRICT – ST. LOUIS

Summary

Reports from contacts in the Eighth District have been mixed since
our previous survey. Manufacturing activity has continued to increase,
while activity in the services sector has declined. Retail sales in
October and early November decreased compared with a year ago, while
auto sales increased over the same period. Home sales have declined
across the District, while commercial and industrial real estate market
conditions have been mixed. Lending at a sample of large District banks
was mostly unchanged over the three-month period ending in October.

Consumer Spending

Survey respondents indicated that retail sales in October and early
November were down, on average, over year-earlier levels. About 54
percent of the retailers saw decreases in sales, while 42 percent saw
increases and 4 percent saw no changes. About 39 percent of the
respondents noted that sales levels met their expectations, 50 percent
reported that sales were below expectations, and 11 percent reported
sales were above expectations. Higher-priced items continued to be weak
sellers. About 58 percent of the contacts noted that inventories were at
desired levels, while 29 percent reported too-high inventories and 13
percent reported too-low inventories. The sales outlook among the
retailers for the rest of the year was positive. About 61 percent of the
retailers expect sales for the rest of the year to increase over 2009
levels, while 26 percent expect sales to decrease and 13 percent expect
sales to remain unchanged.

Car dealers reported that sales in October and early November were
up, on average, compared with year-earlier levels. About 54 percent of
the car dealers saw increases in sales, while 29 percent saw decreases
and 17 percent saw no changes. About 29 percent of the car dealers noted
that used car sales had increased relative to new car sales, while 8
percent reported the opposite. Also, 20 percent reported an increase in
low-end vehicle sales relative to high-end vehicle sales. Roughly 17
percent of contacts reported that their inventories were too low. A
similar number of contacts reported that inventories were too high. The
sales outlook among car dealers for the rest of the year was also
positive. About 58 percent of the car dealers expect sales for the rest
of the year to increase over 2009 levels, but 29 percent expect sales to
decrease. The remaining 13 percent expect sales to be similar to last
years.

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 boat,
sanitary paper product, primary metal, adhesive, textile, and automobile
parts manufacturing industries reported plans to expand existing
operations and hire new employees. Contacts in the plastic materials and
resin, fabricated metal product, automobile parts, and refrigerator and
freezer manufacturing industries reported plans to open new facilities
in the District as well as hire new employees. In contrast, firms in the
wire product, air conditioner, motor, and container manufacturing
industries announced plans to decrease operations and lay off workers.

Services sector activity has declined since our previous report.
Many contacts reported plans to decrease operations and lay off workers
in the near future, while a smaller number of contacts reported plans to
open new facilities and expand operations. Contacts in the
architectural, government, education, gambling, transportation, and
hotel services industries reported plans to decrease operations and lay
off workers. Additionally, a firm in the entertainment industry
announced plans to close its facility and lay off workers. In contrast,
contacts in the health care, government, and business support services
industries announced plans to expand existing operations and hire new
employees.

Real Estate and Construction

Home sales declined throughout most of the Eighth District.
Compared with the same period in 2009, September 2010 year-to-date home
sales were down 7 percent in St. Louis, 1 percent in Little Rock, and 4
percent in Memphis, but increased 8 percent in Louisville. September
2010 year-to-date single-family housing permits increased in the
majority of the District metro areas compared with the same period in
2009. Permits increased 14 percent in Little Rock, 10 percent in St.
Louis, and 14 percent in Memphis, but decreased 2 percent in Louisville
over the same period.

Commercial and industrial real estate market conditions throughout
the District continued to be mixed. Compared with the second quarter of
2010, third-quarter 2010 industrial vacancy rates increased in Little
Rock and Louisville but decreased in Memphis and St. Louis. During the
same period, suburban office vacancy rates increased in Little Rock but
decreased in Louisville and St. Louis. In Memphis, suburban office
vacancy rates remained the same. The downtown office vacancy rates
increased in Louisville and Memphis but decreased in Little Rock and St.
Louis. Commercial and industrial construction was slow across most of
the District. Contacts in St. Louis and northeast Arkansas reported that
the pipeline for commercial construction projects is dry. A contact in
south-central Kentucky reported that commercial construction is stable,
but still not at the same level as recent years. A contact in southern
Indiana noted a few industrial development projects. A contact in
Louisville reported that speculative construction remains hampered by
the lack of financing and economic uncertainties.

Banking and Finance

A survey of senior loan officers at a sample of large District
banks showed little change in overall lending activity for the
three-month period ending in October. Credit standards for commercial
and industrial loans remained basically unchanged, while demand was
about the same. Credit standards for commercial real estate loans were
also basically unchanged, while credit standards for residential
mortgage loans and consumer loans ranged from unchanged to tightened
somewhat. Meanwhile, demand for commercial real estate, residential
mortgage, and consumer loans all varied slightly, ranging from
moderately weaker to moderately stronger.

Agriculture and Natural Resources

Lower-than-average rainfalls and warmer temperatures expedited the
completion of the corn, soybean, sorghum, and cotton harvests in the
Eighth District. However, dry conditions resulted in a 41 percent to 89
percent reduction from last year in the level of adequate and surplus
topsoil moisture levels.

By early November, states in the Eighth District had planted at
least 13 percent more winter wheat in comparison with the average levels
planted by this time during 2005-09, and at least 70 percent of the
current winter wheat crop in the District was rated in fair or better
condition.

** Market News International Washington Bureau: 202-371-2121 **

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