Arkansas, regional economy grows modestly

Economic activity in the seven-state region that includes Arkansas expanded moderately as the manufacturing and service sectors showed incremental growth, according to the Federal Reserve Bank’s quarterly Beige Book report.

"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," noted the regional report, which includes the St. Louis district.

The St. Louis Federal Reserve Bank serves the Eighth Federal Reserve District which consists of Arkansas and portions of six other states: Missouri, Mississippi, Tennessee, Kentucky, Indiana and Illinois.

Reports from the twelve Federal Reserve Districts suggested continued growth in national economic activity during the reporting period of mid-July through the end of August, but with widespread signs of a deceleration compared with preceding periods.

Economic growth at a modest pace was the most common characterization of overall conditions, as provided by the five western Districts of St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. The reports from Boston and Cleveland also pointed to positive developments or net improvements compared with the previous reporting period. However, the remaining Districts of New York, Philadelphia, Richmond, Atlanta, and Chicago all presented mixed conditions or deceleration in overall economic activity.

Following are excerpts from Wednesday’s report on the regional economy over the past three months:
• Consumer Spending
Retail sales reports from contacts in July and early August were mixed. Compared with a year ago, about 37% of the retailers saw increases in sales, while 42% saw decreases and 21% saw no changes.

Higher-priced items continued to be weak sellers. One third of the contacts noted that their inventories were too high, while 16% reported that their inventories were too low. The sales outlook among the retailers for September and October was mostly optimistic.

• 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. In contrast, firms in the furniture, hand tool, and power transmission equipment manufacturing industries announced plans to decrease operations and lay off workers.

• Real Estate and Construction
Home sales varied across the Eighth District. Sales actually increased 19% in Louisville and 5% in Little Rock. Permits increased 17% in Little Rock, 18% in St. Louis, and 23% in Memphis. Permits, however, remained the same in Louisville.

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 commercial constructing contact in northeast Arkansas reported that projects are few and for the most part small, with some activity in education-related projects," the report said.

• 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.

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 District’s 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 Aug. 1, yields for most of the major crops in each District state were expected to be at least 94% of last year’s yields.