Money Talk: Burgundy Book Business Contacts Optimistic About 2015

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BURGUNDY BOOK TOUTS OPTIMISM
The Federal Reserve Bank of St. Louis’ Burgundy Book, which surveys business conditions across nearly all of Arkansas on a quarterly basis, presented some positive findings regarding economic conditions in the Natural State.

The fourth quarter 2014 report, which covers the majority of Arkansas except the northeast part of the state, “revealed substantially more optimism about the near-term outlook compared with three months earlier.”

Some highlights included:

• Nonfarm payroll employment rose by 1.2 percent in the Little Rock MSA in the third quarter of 2014. Total nonfarm employment growth was modestly stronger in the Fayetteville MSA, but modestly weaker in the Fort Smith MSA. Employment growth in the Texarkana MSA in the third quarter rose for the first time in three years.
• The zone’s unemployment rate averaged 6 percent in the third quarter of 2014, similar to the nation’s rate (6.1 percent). The Fayetteville MSA’s unemployment rate fell below 5 percent in the third quarter for the first time in nearly six years.
• Housing activity in the Little Rock Zone was generally weaker than in other parts of the nation in the third quarter. There were pockets of strength, however, as evidenced by outsized increases in home prices and single-family building permits in the Texarkana MSA.
• After falling in the second quarter, Arkansas’s per capita credit card balances rose modestly in the third quarter. Still, the state’s debt-to-income ratio fell for the third consecutive quarter.
• Arkansas banks remained more profitable than their Eighth District and U.S. peers in the third quarter. Asset quality continued to improve at Arkansas banks.

Access the full report at this link.

FEDS TOUT MODERATION, PATIENCE IN FOMC REPORT
The Fed’s Open Market Committee (FOMC) report sent signals of moderation and patience to observers and investors, leading to a big run on Wall Street in the last half of the week.

Excerpts from the FOMC statement on Wednesday (Dec. 17) included:

• Information received since the Federal Open Market Committee met in October suggests that economic activity is expanding at a moderate pace.
• The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced.
• To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate.
• Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy.

There is much more in the statement, which you can read here, including comments from three FOMC members who disagreed with the policy-making body’s decisions.

The FOMC report was a springboard for stock activity on Thursday and Friday. The S&P 500 Index rose 3.4% for the week. The Dow Jones Industrial Average rose more than 300 points net during the last two days of last week.

ARVEST SURVEY: ARKANSANS CAUTIOUS ON SPENDING, DEBT AND ECONOMY
Most Arkansans and fellow consumers in neighboring states have held off making major household purchases over the last half of 2014 and have no plans to splurge on big ticket items well into 2015, according to the third and final phase of the Fall 2014 Arvest Consumer Sentiment Survey released Tuesday (Dec. 16).

The cautious sentiment among Arkansas consumers is in line with regional and national indicators that show most Americans are still concerned about the tepid recovery of the U.S. economy, despite lower inflation and energy prices. Access more in the latest Arvest report at this link.

WALMART DE MEXICO SELLS BANKING OPERATION
Wal-Mart de Mexico also disclosed earlier last week that it sold its banking operations, Banco Walmart, for roughly $247 million.

The agreement includes the sale of 100% of Banco Walmart at a price equivalent to 1.7 times shareholders equity. Mexican billionaire banker and business magnate Carlos Slim’s Grupo Financiero Inbursa is the acquirer and gives Inbursa access to more than 2,100 Wal-Mart stores throughout Mexico.

Banco Walmart is considered one of Mexico’s smaller financial institutions. It had 8.03 billion pesos in assets ($548.58 million US) as of the end of October. Banco Walmart had 5.43 billion pesos ($370.96 million US) in deposits and 1.79 billion pesos ($122.29 million US) in loans on its books in October. As of December 31, 2013 Grupo Financiero Inbursa owns the sixth largest bank in Mexico in terms of total assets and in terms of loan portfolio, as well as the fourth largest insurance company.