WASHINGTON (MNI) – The following is the text of the Federal
Reserve’s Beige Book survey from the St. Louis district, published
Wednesday:

Summary

The economy of the Eighth District has continued to expand at a
moderate pace since our previous report. Manufacturing activity has
continued to increase since the previous report, while activity in the
services sector has declined. Retail sales increased in April and early
May over year-earlier levels. Similarly, auto sales increased over the
same period. Residential real estate activity has continued to decline,
and commercial and industrial real estate market conditions have been
mixed. Overall lending at a sample of large District banks saw little
change during the first quarter of 2011 compared with the fourth quarter
of 2010.

Consumer Spending

Contacts reported that retail sales in April and early May were up,
on average, over yearearlier levels. About 48 percent of the retailers
reported increases in sales, while 36 percent saw decreases and 16
percent saw no changes. Roughly 41 percent of the retailers noted that
sales levels were below their expectations, 35 percent reported that
sales met expectations, and 24 percent reported that sales were above
expectations. About 32 percent of the retailers noted that their
inventories were too high, while 20 percent reported that their
inventories were too low. The sales outlook for June and July was mostly
optimistic: About 60 percent of the retailers expect sales to increase
over 2010 levels, while 24 percent expect sales to decrease and 16
percent expect sales to be similar to last year.

Car dealers in the District reported that sales in April and early
May were up, on average, compared with last year’s sales. About 58
percent of the car dealers surveyed saw increases in sales, while 29
percent saw decreases and 13 percent saw no changes. About 38 percent of
the car dealers noted that used car sales had increased relative to new
car sales, while 21 percent reported the opposite. Also, about 29
percent of contacts reported an increase in sales of low-end vehicles
relative to high-end vehicles, while less than 4 percent reported the
opposite. About 57 percent of the car dealers surveyed reported that
their inventories were below desired levels, while 9 percent reported
that their inventories were too high. The sales outlook for June and
July was generally optimistic: About 58 percent of the car dealers
expect sales to increase over 2010 levels.

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 tire,
powder coating, food, paper, packaging, machinery, automobile, and ship
manufacturing industries reported plans to expand existing operations
and hire new workers. In contrast, a firm in paper manufacturing
announced plans to close a plant and lay off employees. Additionally,
some automobile manufacturers have reduced their production because of a
shortage of parts sourced from Japan.

Activity in the District’s services sector has declined since our
previous report. Numerous casinos in the District have been forced to
temporarily close because of flooding on the Mississippi River.
Additionally, contacts in the telephone call center, health care,
business support, and support activities for transportation industries
reported plans to decrease operations in the District and lay off
employees. In contrast, a contact in the nursing care industry announced
plans to expand operations and hire new workers.

Real Estate and Construction

Home sales continued to decline throughout most of the Eighth
District. Compared with the same period in 2010, April 2011 year-to-date
home sales were down 11 percent in Louisville and Memphis and 19 percent
in St. Louis and Little Rock. Residential construction also continued to
decrease throughout the District. April 2011 year-to-date single-family
housing permits decreased in the majority of the District metro areas
compared with the same period in 2010. Permits decreased 33 percent in
Little Rock, 42 percent in St. Louis, and 25 percent in Memphis and
Louisville.

Commercial and industrial real estate market conditions were mixed.
Compared with the fourth quarter of 2010, first quarter 2011 suburban
office vacancy rates increased in St. Louis, decreased in Little Rock
and Louisville, and remained constant in Memphis. The downtown office
vacancy rates increased in Louisville and St. Louis, decreased in
Memphis, and stayed the same in Little Rock. Industrial vacancy rates
decreased for Louisville, Memphis, and St. Louis but increased for
Little Rock. Commercial and industrial construction activity remained
slow throughout most of the District. Contacts in Little Rock noted that
commercial construction has remained fairly weak. Contacts in St. Louis
and northwest Arkansas also noted weak commercial construction activity.
In contrast, some contacts in southwestern Illinois and Kentucky noted
that overall construction has increased recently.

Banking and Finance

A survey of senior loan officers at a sample of large District
banks indicates little variation in overall lending activity in the
first quarter of 2011 relative to the fourth quarter of 2010. During
this period, credit standards for commercial and industrial loans
remained unchanged, while demand for these loans ranged from unchanged
to moderately stronger. Credit standards for commercial real estate
loans were unchanged, while demand ranged from unchanged to moderately
weaker. Meanwhile, credit standards for consumer loans remained
unchanged, while demand ranged from about the same to moderately
stronger. Credit standards for residential mortgage loans ranged from
unchanged to somewhat tighter, while demand ranged from moderately
weaker to moderately stronger.

Agriculture and Natural Resources

Heavy rain and flooding on the Mississippi River during April and
early May slowed down field work and affected crop conditions in the
District. The rates of completion for the planting of corn, cotton,
rice, sorghum, and soybeans were behind their 5-year average in most
District states; crop emergence was generally behind schedule as well.
At least 67 percent of the winter wheat crop was rated in fair or better
condition across the District states. Similarly, 88 percent or more of
pastures were rated in fair or better condition. Monthly coal production
for April 2011 was 2.6 percent lower compared with April 2010.

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

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