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AN EIGHTH DISTRICT PERSPECTIVE Federal Reserve Bank of St. Louis Winter 1983-84 District Economy Continues To Expand Current indicators of economic activity point to a continued expansion at both the national and regional levels. A t the national level, industrial production rose at a 11 Vi percent rate over the first 10 months of this year, while retail sales expanded at a 10 percent rate. Payroll employment rose at a rate of 5 percent in November and the unemployment rate fell sharply to 8.4 percent. Economic activity in the District is following suit. After declining throughout 1982, regional indexes of general business activity have risen during 1983 and, with the exception of Kentucky, the rate of increase has accelerated in the most recent period. After growing at a relatively modest pace of about 4 percent during 1982, District personal income grew at a rate of IVi percent during the second quarter of 1983. Personal income growth in Arkansas and Missouri were particularly strong at rates of 10 percent and 8 V2 percent, respectively. Employment District payroll employment has been growing at an annual rate of 2 Vs percent during the most recent three months for which data are available. However, due to an expansion in the labor force, the District unemploy ment rate was roughly unchanged. Employment in Missouri has been boosted by the increase in demand for domestically produced automobiles. The forecast for passenger car production in tUe current year is 6.85 million units, 35 percent higher than in 1982. Missouri auto plants currently employ about 23,000 persons, about 50 percent more than in October 1982, and the outlook is bright for continued employment growth at these plants. Retail Sales September and October retail sales rose nationally at an annual rate of 15 V4 percent after a brief downturn in August. September sales at major District department stores mirrored this situation, averaging about 11 percent above September sales last year, with most merchants expecting an excellent Christmas season. Automobile sales have been robust as well. Six large District dealerships reported year-over-year gains averaging 21 percent. Manufacturing and Construction Production at most of the industrial firms in the District has risen since late summer, though the rate of increase has slowed somewhat. This rate of increase since the beginning of the year has been more rapid than can be maintained indefinitely, so some slowing was to be expected. Residential home sales in the District in September and early October were below the peaks reached in the WINTER 1983-84 FEDERAL RESERVE BANK OF ST. LOUIS spring but were still ahead of year-ago levels. Con struction of homes, however, continued to be brisk due to a backlog of orders. The cumulative total for St. Louis construction (residential and nonresidential) over the first nine months of 1983 was about 35 per cent ahead of the total for the same period last year. Agriculture substantial reductions in the output of corn, soybeans, tobacco and cotton. Corn production nationally is ex pected to be about 49 percent below last year’s, while soybean production is expected to decline by 32 per cent. Burley tobacco production in Kentucky (which normally amounts to about two-thirds of the nation’s crop) is at its lowest level since 1943. The combination of the reduced harvest plus low prices for burley could reduce cash receipts to half the 1982 level. This year’s drought was the worst in 50 years. Coupled with the PIK program, the drought caused —G.J. Santoni A Longer-Run View Of The District 1970 71 72 73 74 75 76 77 76 79 80 81 82 1983 Shaded areas represent periods of business recessions. There is a considerable amount of fluctuation u* short-run regional economic data. As a result, these fluctuations can be misleading indicators of under lying trends. The chart above illustrates this point. It shows quarterly growth rates in District (solid line) and national (broken line) personal income. The shaded areas represent periods of recession, while the horizon tal lines are the average growth rates over the entire period. At some points, the differences between the quarter ly growth rates and the average growth rate over the whole period are very large. In addition, the differences at any point between District and national quarterly growth rates can be considerable. For example, per sonal income in the District grew at a rate of 6 percent during the first quarter of 1983, while growing at a slower rate of only 4 percent at the national level. The difference between these quarterly rates is much larger than the difference in the average growth rates over the whole period. These differ by only one-tenth of a percentage point. Since, on average, there is little difierence between District and national growth rates, any large difference between quarterly growth rates will tend to be offset later on. This appears to be the case in the second quarter of this year. The national growth rate in personal income rose to 9 percent, while personal income grew at a pace of only IV2 percent in the District. Equally important, the second quarter 1983 growth rate of District personal income is below its longer-run average growth rate, as is typically the case during the initial phase of an economic expansion. As the expan sion matures, these growth rates generally rise above their long-run averages. If the boom in economic activi ty currently under way continues, we can expect the growth rate in District personal income to rise above its second quarter 1983 level. —G.J. Santoni Business—An Eighth District Perspective is a quarterly summary of business conditions in the area served by the Federal Reserve Bank of St. Louis. Single subscriptions are available free of charge by writing: Research and Public Information Department, Federal Reserve Bank of St. Louis, P.O. Box 442, St. Louis, Missouri 63166. Views expressed are not necessari ly official positions of the Federal Reserve Bank of St. Louis or the Federal Reserve System. 2 FEDERAL RESERVE BANK OF ST. LOUIS WINTER 1983-84 EIGHTH DISTRICT BUSINESS DATA Current Period General Business Indexes2 Growth Rates1 Year-to-Date 1983 1982 Aug-Oct A rkansas K e n tu cky M isso u ri T ennessee 11.2% 0.9 10.7 5.2 Retail Sales 9.6% 3.3 7.6 4.0 - 2 .2 % -1 .4 -1 .6 -0 .9 10.1% 11.6 5.2 10.5 17.1 5.3% 8.7 9.1 12.7 4.1 6.5% 6.7 8.8 4.8 7.7 6.2 4.7% 3.9 3.2 3.0 3.7 5.1 2.3% 1.4 2.7 1.4 1.1 2.6 1.8 0.8 0.7 1.9 -0 .4 -2 .4 % -3 .0 -2 .4 -1 .3 - 3 .1 - 4 .1 -4 .6 -2 .2 -2 .8 - 4 .1 -3 .5 3.5% 5.4 5.3 4.8 4.3 5.4 4.7 4.5 1.9 5.3% 6.5 6.6 5.2 3.1 6.5 6.5 6.3 4.0 July-Sept U nited S tate s D is tric t A rk a n s a s 3 M is s o u ri Tennessee 4.7% 18.0 7.4 20.2 22.3 Personal Income 2nd quarter ’83 U nited S tate s D is tric t A rkansas K e ntucky M isso u ri Tennessee 9.1% 7.5 9.9 4.1 8.5 7.9 Payroll Employment Aug-Oct U nited S tate s D is tric t A rkansas L ittle R ock K e n tu cky E vansville(IN ) L o u is v ille M isso u ri St. L o u is T ennessee M em ph is 3.3% 2.5 3.5 0.7 0.2 15.3 0.7 2.2 2.4 3.9 1.8 Average Hourly Earnings-Mfg. Aug-Oct U nited S tate s A rka nsa s L ittle R ock K e n tu cky L o u is v ille M is s o u ri St. L ou is T ennessee M em ph is 2.3% 1.2 -5 .2 1.6 -0 .6 6.1 5.0 4.5 8.2 Employment1 Year-to-Date 1983 Same Period 1982 Prices1 Year-to-Date 1983 Same Period 1982 Key Industries F a b rica te d M etal P ro d u cts E le c tric a l and E le c tro n ic E q u ip m e n t N o n e le c tric a l M a ch in e ry T ra n s p o rta tio n E q u ip m e n t Food and K in dred P ro d u c ts T e x tile and A pparel P rin tin g and P u b lis h in g C h e m ica ls and A llie d P ro d u c ts C o n s tru c tio n 1.1% 9.5 9.6 13.1 -0 .3 7.9 1.1 0.5 5.7 -8 .8 % - 1 0 .9 - 1 8 .0 -3 .3 1.0 -7 .0 -2 .7 -5 .7 - 3 .1 -0 .6 % 4.4 2.4 -0 .2 3.6 1.5 6.0 2.2 5.0 1.0% 3.1 4.4 2.2 3.8 0.3 8.9 -0 .6 1.5 3 EIGHTH DISTRICT BUSINESS DATA Current Period*12 3 Unemployment Rate U nite d S ta te s D is tric t A rka nsa s L ittle R ock K e n tu c k y E va nsville (IN) (July-S ept.) L o u is v ille (July-S ept.) M is s o u ri St. L o u is T ennessee M e m p h is Previous 3 Months Average Yearto-Date 1983 Average 1982 Aug-Oct 9.2% 10.3 10.3 8.3 11.3 10.1 9.9 9.1 9.9 10.7 9.0 9.9% 10.2 9.3 7.2 11.2 10.0 10.3 9.4 10.3 10.8 9.0 9.9% 10.4 9.6 7.6 11.1 10.4 10.4 9.6 10.3 11.3 9.4 9.7% 10.4 9.7 7.6 10.7 9.8 11.7 9.3 9.9 11.8 9.6 Construction Contracts4 (m illio n s o f d o lla rs ) D is tric t A rka n sa s K e n tu c k y E astern M is s o u ri W e ste rn T en ne sse e Housing Permits L ittle R ock L o u is v ille S t. L ou is M e m p h is Aug-Oct $578.5 132.1 189.8 176.2 80.4 $548.1 114.2 194.7 154.3 84.9 $497.5 107.9 173.8 144.6 71.2 $352.3 78.2 125.0 105.5 43.6 389 239 829 466 285 331 873 478 144 158 531 221 July-Sept 305 427 845 601 NOTE: With the exception of construction contracts and employment and prices in key industries, all data are seasonally adjusted. 1 Data are presented as three-month averages to minimize distortions due to the large variability of monthly data. The current period growth rate is a comparison of the average of the current three months to the average of the previous three months. The year-to-date growth rate is from the average of the three months ended in December of 1982. All growth rates are compounded annual rates of change. 2 Sources: Arkansas and Missouri from Southwestern Bell, Kentucky and Tennessee from South Central Bell. 3 Source: Southwestern Bell. 4 Source: F.W. Dodge, Construction Potentials, McGraw-Hill Information Systems Company, proprietary data provided by special permission.
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