WASHINGTON (MNI) – The following is the text of the Federal
Reserve’s Beige Book survey Eighth District summary, published
Wednesday:

EIGHTH DISTRICT – ST. LOUIS

Summary

The economy of the Eighth District has grown modestly since our
previous report. Economic activity in the manufacturing sector
increased, on balance, as did activity in the services sector. While
retail sales reports were mixed, auto sales in July and early August
increased over a year ago. Residential real estate markets held steady
and commercial real estate activity remained slow. Overall lending
activity at a sample of large District banks was largely unchanged
during the three-month period ending in July.

Consumer Spending

Retail sales reports from contacts in July and early August were
mixed. Compared with a year ago, about 37 percent of the retailers saw
increases in sales, while 42 percent saw decreases and 21 percent saw no
changes. About 32 percent of the respondents noted that sales levels met
their expectations, 47 percent reported that sales were below
expectations, and 21 percent reported that sales were above
expectations. Higher-priced items continued to be weak sellers. One
third of the contacts noted that their inventories were too high, while
16 percent reported that their inventories were too low. The sales
outlook among the retailers for September and October was mostly
optimistic. About 56 percent of the retailers expect sales to increase
over 2009 levels, while 20 percent expect sales to decrease and 24
percent expect sales to be similar to last year.

Car dealers in the District reported that, compared with last year,
sales in July and early August were up, on average. About 44 percent of
the car dealers surveyed saw increases in sales, while 32 percent saw
decreases and 24 percent saw no changes. Just under half of the car
dealers noted that used car sales had increased relative to new car
sales, while 12 percent reported the opposite. Also, 20 percent reported
more acceptances of finance applications, but 12 percent reported more
rejections. A slight majority of the car dealers surveyed reported that
their inventories were too low, while 12 percent reported that their
inventories were too high. The sales outlook among the car dealers for
September and October was generally optimistic. About 56 percent of the
car dealers expect sales to increase over 2009 levels, but 16 percent
expect sales to decrease. The remaining 28 percent expect sales to be
similar to last year.

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 and reduce operations. Firms in the soap
and cleaning compound, aerospace products and parts, glass products,
motor vehicle parts, and primary metal manufacturing industries reported
plans to open new facilities in the District and hire employees.
Contacts in the food, engine, adhesive, and sanitary paper products
manufacturing industries reported plans to expand existing facilities
and operations. In contrast, firms in the furniture, hand tool, and
power transmission equipment manufacturing industries announced plans to
decrease operations and lay off workers.

The District’s services sector also has continued to improve since
our previous report. Firms in the transportation, business support,
telecommunications, and government services industries expanded existing
operations and hired new employees. Additionally, firms in the
restaurant industry opened several new facilities. In contrast, contacts
in the business support services and janitorial services industries
reported plans to decrease operations and lay off workers.

Real Estate and Construction

Home sales varied across the Eighth District. Compared with the
same period in 2009, July 2010 year-to-date home sales were down 1
percent in St. Louis and 1 percent in Memphis. However, over the same
period, sales increased 19 percent in Louisville and 5 percent in Little
Rock. Residential construction continued to improve in most of the
District. July 2010 year-to-date single-family housing permits were up
in the majority of the District metro areas compared with the same
period in 2009. Permits increased 17 percent in Little Rock, 18 percent
in St. Louis, and 23 percent in Memphis. Permits, however, remained the
same in Louisville.

Demand conditions in commercial and industrial real estate markets
were mixed, while activity in the sector remained weak. Compared with
the first quarter of 2010, second-quarter 2010 industrial vacancy rates
decreased in St. Louis but increased in Little Rock and Memphis; vacancy
rates remained stable in Louisville over the same period. The downtown
office vacancy rate decreased in Little Rock, Louisville, and Memphis
but increased in St. Louis. During the same period, suburban office
vacancy rates decreased in Little Rock and Memphis but increased in
Louisville and St. Louis. A contact in south central Kentucky reported
that commercial construction is steady but there are concerns that the
pipeline for new projects is lean. A commercial constructing contact in
northeast Arkansas reported that projects are few and for the most part
small, with some activity in education-related projects. A contact in
St. Louis reported that construction of office and warehouse spaces has
been limited. In contrast, contacts in the northeast Mississippi region
have reported significant industrial construction plans.

Banking and Finance

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

Agriculture and Natural Resources

Generally, development of the Districts major crops remained ahead
of its 5-year average pace. The overall condition of corn, soybeans,
rice, cotton, and sorghum has deteriorated slightly since our previous
report: As of August 1, yields for most of the major crops in each
District state were expected to be at least 94 percent of last years
yields, although yields for corn and soybeans in both Kentucky and
Tennessee and winter wheat in Indiana were expected to be 10 to 20
percent lower than last year. Since our previous report, soil moisture
ratings and pasture conditions have deteriorated in most District
states.

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

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