Burgundy Book: Two-thirds Expect Improving Economic Conditions

The St. Louis Federal Reserve Bank’s Q2 Burgundy Book spotlighted a decline in manufacturing, a burst in transportation, and notable growth in Arkansas’ professional ranks.

It also showed some improvement in several consumer-related metrics as well as retail activity as survey participants felt more positive than negative about future economic conditions.

The Burgundy Book is a quarterly compilation of statistics and anecdotal evidence on economic conditions in 62 of the state’s 75 counties known as the Little Rock Zone. It covers all areas of the state except for parts of Northeast and Eastern Arkansas, which are grouped with Memphis data.

Kevin Kliesen, Business Economist and Research Officer for the St. Louis Fed, said Arkansas’ near-term outlook for the Little Rock zone “improved modestly,” according to a May survey of regional business leaders.

“Roughly two-thirds expect economic conditions in 2014 to be better or somewhat better than they were in 2013,” Kliesen said in the report.

Highlights of the report included:

• In contrast to the nation, manufacturing employment in the Little Rock zone declined in the first quarter. However, activity in the transportation sector appears to be ramping up, as reflected in a sizable increase in job openings over the past several months.
• Arkansas’ professional and business services sector continues to grow. Though it accounts for only 13% of the state’s total non-farm employment, it has grown 10% since 2010. Anecdotal evidence suggests this growth may be due to a increase in demand for IT services, especially within the healthcare sector.
• While weather impacted residential construction and home sales, multi-family housing remains stable. The vacancy rate fell by 40 basis points from the previous quarter. Contacts report that developers continue to look for new sites for apartment complexes.
• Office market vacancy rates in Little Rock continue to fall. Vacancy rates in the central business district (CBD), midtown, and the suburbs show signs of convergence. The spread between office vacancy rates in the CBD and the suburbs has decreased by four percentage points in the past two years.

The report noted that there are fewer planned industrial construction projects in the planning stages compared to the previous quarter.

ON THE CONSUMER SIDE
There was also a decline in credit card debt across the zone as consumers appeared to do a better job of getting their personal finances in order.

The Burgundy Book analysis said that mortgage and credit card delinquency rates declined in Q4 2013, the most recent data available. It noted a slight uptick in auto loan delinquencies, however.

Other consumer-related data included:

• Anecdotal evidence indicates that few consumers have been declined for a car loan, and demand for used vehicles is strong as individuals have been using tax refunds to purchase used vehicles.
• Luxury retailers in northwest Arkansas reported positive sales growth. Other retailers reported a slight increase in sales.

You can access the full report at this link.