WASHINGTON (MNI) – The following is the latest Beige Book survey of
economic conditions in the Federal Reserve’s Eighth District, published
Wednesday:

Eighth District – St. Louis

Summary

The economy of the Eighth District has continued to grow at a
modest pace since our previous survey. Residential real estate market
conditions have improved moderately. Similarly, commercial real estate
market conditions have also improved. Retail and auto sales in April and
early May increased over year-earlier levels. In contrast, recent
reports of plans from firms in the manufacturing and services sectors
were mixed. Reports of lending activity at a sample of large District
banks during the first quarter of 2012 were somewhat mixed.

Consumer Spending

Contacts reported that retail sales in April and early May were up
slightly, on average, over yearearlier levels. About 60 percent of the
retailers reported increases in sales, while 12 percent saw decreases
and 28 percent saw no changes. Thirty-seven percent of the retailers
noted that sales levels met their expectations, 42 percent reported that
sales were below expectations, and 21 percent reported that sales were
above expectations. Twenty percent of the retailers noted that their
inventories were too high, while 12 percent indicated that their
inventories were too low. The sales outlook for the summer was positive:
56 percent of the retailers expect sales to increase over 2011 levels,
while 24 percent expect sales to decrease and 20 percent expect sales to
be similar to last year’s sales. Car dealers in the District reported
that sales in April and early May were up, on average, compared with
last year. About 64 percent of the car dealers surveyed saw increases in
sales, while 24 percent saw decreases and 12 percent saw no changes.
Twenty percent of the car dealers noted that new car sales had increased
relative to used car sales, while 20 percent reported the opposite.
Also, roughly 28 percent of contacts reported an increase in sales of
low-end vehicles relative to high-end vehicles, while about 12 percent
reported the opposite. Forty percent of the car dealers surveyed
reported that their inventories were too low, while about 8 percent
reported that their inventories were too high. The sales outlook for
June and July was optimistic: 88 percent of the car dealers expect sales
to increase over 2011 levels, while just 8 percent expect sales to
decrease and 4 percent expect sales to be similar to last year’s sales.

Manufacturing and Other Business Activity

Reports of plans for manufacturing activity have been mixed since
our previous report. Several manufacturers reported plans to open plants
and hire workers, while a similar number of contacts reported plans to
close plants and lay off workers in the near future. Firms in the paper
product, agriculture, chemical, paint, and military and police equipment
manufacturing industries reported plans to decrease existing operations
or close plants in the District. In contrast, contacts in the automobile
parts, wood product, solar panel, and steel product manufacturing
industries reported plans to hire workers and increase operations.

Reports of planned activity in the District’s service sector also
have been mixed since our previous survey. Contacts in air
transportation support, travel, and religious organization services
announced plans to lay off workers and reduce operations in the
District. In contrast, firms in software development services announced
plans to hire additional workers and expand operations.

Real Estate and Construction

Home sales increased throughout most of the Eighth District on a
year-over-year basis. Compared with the same period in 2011, April 2012
year-to-date home sales were up 13 percent in Louisville, 3 percent in
Little Rock, 20 percent in Memphis, and 18 percent in St. Louis.
Residential construction increased in the majority of the District over
this time period. April 2012 year-to-date single-family housing permits
increased in the majority of the District metro areas compared with the
same period in 2011. Permits increased 35 percent in Louisville, 20
percent in Little Rock, 31 percent in Memphis, and 28 percent in St.
Louis.

Commercial and industrial real estate conditions have continued to
improve throughout most of the District. Contacts in Louisville reported
that the increase in office real estate activity slowed during April,
but overall performance in the first quarter of 2012 remained strong. A
contact in St. Louis reported strong commercial real estate activity and
weak industrial real estate activity in the first quarter of 2012.
Commercial and industrial construction activity improved moderately
throughout most of the District.

Contacts in south central Kentucky noted that new large commercial
construction projects have been undertaken, and a contact in Louisville
reported plans for speculative industrial construction. A contact in
Pine Bluff, Arkansas, reported some new large commercial construction
plans. A contact noted a few large industrial construction plans in
Wentzville, Missouri, and some commercial and industrial construction
plans in Jefferson County, while a contact in St. Louis reported steady
commercial construction activity.

Banking and Finance

A survey of senior loan officers at a sample of large District
banks indicated moderate changes in overall lending activity during the
first quarter of 2012. During this period, credit standards for
commercial and industrial loans remained unchanged, while demand for
such loans was moderately stronger. Credit standards for commercial real
estate loans generally remained unchanged. Demand for commercial real
estate loans ranged from unchanged to substantially stronger. Meanwhile,
credit standards for consumer loans ranged from basically unchanged to
somewhat eased, while demand ranged from moderately weaker to moderately
stronger. Respondents noted that credit standards for prime residential
mortgage loans remained unchanged, while demand for these loans ranged
from about the same to substantially stronger.

Agriculture and Natural Resources

Crop moisture levels from April to mid-May were classified as
slightly dry to favorably moist in most of the District except southern
Arkansas and most of Mississippi. Rates of completion for the planting
of corn, cotton, rice, sorghum, and soybeans were at least 15 percentage
points higher than their 5-year average rates in most District states,
while crop emergence was also ahead of schedule. More than 88 percent of
the winter wheat crop was rated as fair or better, while 77 percent or
more of pasture land was also similarly rated in all District states.
The District’s year-to-date coal production for early May was 3.8
percent lower compared with the same period last year. Similarly, the
District’s coal production for April 2012 was 2.6 percent lower than in
April 2011.

** MNI Washington Bureau: 202-371-2121 **

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