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Current Economic Conditions in the

Eighth Federal Reserve District
St. Louis Zone
March 19, 2008

Prepared by the

Center for Regional Economics—8th District (CRE8)
Federal Reserve Bank of St. Louis

Eighth
Federal Reserve
District
I
ILLINOIS
ILL NO
ILLINO S
ILLINOIS

IN IANA
IN IAN
INDIANA
ND
NDIAN

Columbia
Jefferson City

St. Louis

MISSOURI
ISS UR
SSOUR
S
SO

Louisville-Jefferson County

Evansville
Owensboro

Elizabethtown

KENTUCKY
KENTUCKY
KEN UCKY
EN UC
N
NTU

Springfield
Bowling Green

Fayetteville-Springdale-Rogers
Jonesboro
Jackson

ARKA AS
ARKAN AS
RKANSAS
AN

TEN SSEE
TEN ESSEE
TENNESSEE
NNE
N

Fort Smith

Memphis

Little Rock-North Little Rock
Hot Springs
Pine Bluff

Texarkana

MISS SIPPI
MISS SSIPPI
SSISS PP

This report summarizes information on economic conditions in the St. Louis zone of the Eighth Federal Reserve
District (see map above), headquartered in St. Louis. Separate reports have also been prepared for the Little Rock,
Louisville, and Memphis zones and can be downloaded from the CRE8 web site (research.stlouisfed.org/regecon/).
The first section of this report summarizes information provided by various contacts within the District and is
similar to the type of information found in the Fed’s Beige Book (federalreserve.gov/fomc/beigebook/2008/).
The period covered by this section coincides roughly with the two Beige Book periods immediately preceding this
report. The second section includes government-provided data for the metro areas and states of the St. Louis
zone. These data are the most recent available at the time this report was assembled.
For more information, please contact the St. Louis office:
Randy Sumner, 314-444-8644, randall.c.sumner@stls.frb.org
Economists:
Howard Wall, 314-444-8533, howard.j.wall@stls.frb.org
Subhayu Bandyopadhyay, 314-444-7425, subhayu.bandyopadhyay@stls.frb.org

St. Louis Zone Report—March 19, 2008
Overall economic activity in the St. Louis zone slowed during the early part of 2008. General retailers and automobile dealers
reported weakened sales, and manufacturing activity was reduced. Residential real estate markets continued to soften, although
commercial markets remained strong. Banking conditions weakened somewhat, but the sector remained stable. Because of increases
in the prices of most major crops, the agricultural sector showed considerable strength.

Consumer Spending
Retail sales reports for January and early February were mostly
negative among general retailers and auto dealers in the St. Louis
zone. About 80 percent of the general retailers and 83 percent
of the auto dealers surveyed indicated that sales were down
compared with the same months in 2007. Among auto dealers,
17 percent noted that used car sales had increased relative to
new car sales, while the rest reported no change. One-third of
the respondents reported recent increases in rebates and incentives, while the remaining contacts reported no change.
About 33 percent reported more rejections of finance applications, while none of the contacts reported more acceptances.
Half of the general retailers and one-third of the car dealers
noted that inventories were at desired levels. The sales outlook
for March and April was mixed among both sets of contacts:
Half of the general retailers and one-third of the car dealers
expected sales to increase over 2007 levels, while 17 percent
of general retailers and 50 percent of car dealers expected sales
to decrease.

Manufacturing and Other Business Activity
Manufacturing activity in the St. Louis zone slowed during the
first quarter of 2008, with layoffs in auto assembly and parts
plants as the most prominent examples. A firm in chemical
manufacturing reported plans to open a new facility in the zone,
while a firm in fabricated metal product manufacturing reported
plans to close their facility. The service sector fared much better,
but there were signs of weakness as job losses were reported
in retail services.

Real Estate and Construction
In St. Louis, January home sales declined by 12 percent compared with the same period in 2007 and repeat-sale price
indices rose more slowly. In addition, there was a sizable increase
in the share of sales at the very low end of the market. Weakness

in the real estate market continued to affect residential construction as residential building permits fell by around 20 percent.
In contrast, the commercial real estate market has been relatively strong. Industrial vacancy rates were fairly stable and
downtown and suburban office vacancy rates both tended to
decline. Contacts in St. Louis expect the commercial real estate
market to remain strong in 2008 unless the current economic
slowdown worsens.

Banking and Finance
Banking conditions in the St. Louis zone deteriorated slightly
during the first quarter of 2008. Over half of all contacts reported
softening demand in all major categories of loans, but most
notably in commercial real estate and commercial and industrial
loans. Reports on residential mortgage loan demand were
mixed, with some contacts indicating that lower rates have
resulted in increased loan activity. A number of contacts reported
tightened credit standards, citing an uncertain economic outlook
and a reduced tolerance for risk as reasons for the change.
Most contacts reported modest declines in deposits.

Agriculture and Natural Resources
Total coal production in Illinois and Missouri for December was
1 percent higher than year-earlier levels, and total coal production for 2007 increased by 4 percent from 2006 levels. As of
mid-December, year-to-date bales of cotton ginned (separated
from the seed) in Missouri were down 13 percent from the same
period in 2006. The total value of all field crops in St. Louis
zone states rose by 46 percent from 2006 to 2007. Illinois had
an increase of 47 percent and Missouri had an increase of 43
percent. The increased values mostly reflect higher prices of
major crops in 2007 than in 2006, especially corn (about 30
percent for each state), soybeans (over 60 percent), winter wheat
(over 50 percent), and sorghum (over 20 percent), whereas
total production increased only for corn (in both states) and
sorghum (in Missouri).

Nonfarm Payroll Employment Growth
3-Month Average, SA, January 2001–January 2008
Percent
0.4
0.3
0.2
0.1
0
–0.1
United States
St. Louis MSA

–0.2
–0.3
2001

2002

2003

2004

2005

2006

2007

Payroll employment growth in the St. Louis
MSA experienced dramatic swings during
2007, and the most recent estimates indicate that St. Louis underperformed the rest
of the country over the year as a whole.
(See the table at the top of the final page,
which provides recent benchmark revisions
of employment data.) Estimates for recent
months suggest that this trend continues.
Over the three-month period ending in
January 2008, St. Louis monthly employment growth averaged 0.03 percent, while
U.S. employment growth averaged 0.10
percent.

2008

St. Louis MSA Employment Growth by Sector
Year/Year Percent Change, January 2007–January 2008
Percent
4.0
3.0
2.0
1.0
0
–1.0

St. Louis MSA employment growth between
January 2007 and January 2008 varied a
great deal across sectors. According to the
most recent estimates, the strongest sector
was information, which saw an employment
increase of 3.1 percent. Other relatively
strong sectors were education and health;
trade, transportation, and utilities; and
finance. The manufacturing sector was
estimated to have experienced a 2 percent
reduction in the number of jobs.

–2.0
–3.0

Total
Nonfarm

Natural Manufacturing Trade, Information Financial
Resources,
Transportation,
Activities
Mining, and
and Utilities
Construction

Professional Education
and
and
Business
Health
Services

Leisure
and
Hospitality

Other
Services

Government

St. Louis Zone—MSA Employment and Unemployment
Nonfarm payroll employment percent change,
January 2007–January 2008
Total
St. Louis
Columbia, Mo.
Jefferson City, Mo.
Springfield, Mo.
United States

Goods producing

Service providing

Unemployment rate
December 2007

0.35
1.91
1.28
3.08
0.89

–1.33
–3.30
-2.00
1.80
–1.48

0.67
2.50
1.76
3.29
1.35

5.4
3.5
4.1
4.1
4.8

SOURCE: Bureau of Labor Statistics.

St. Louis Zone—MSA Housing Activity
Total building permits,
units year to date
Percent change
–44.2
–70.8
–16.7
36.5
–32.4

January 2008
St. Louis
Columbia, Mo.
Jefferson City, Mo.
Springfield, Mo.
United States

436
42
5
202
75,933

House price index,
percent change,
2007:Q4/2006:Q4
2.56
–0.72
2.18
3.10
0.84

Total residential building permits in January
were lower than a year earlier in every MSA
in the zone except Springfield, Missouri,
where permits grew by a relatively robust
37 percent. St. Louis and Columbia,
Missouri, both saw larger decreases than
did the country as a whole. House price
indices, on the other hand, increased in
all metro areas in 2007 except Columbia.
Indices for the other three metro areas all
rose by more than 2 percent.

SOURCE: Bureau of the Census, Office of Federal Housing Enterprise Oversight.

St. Louis Area Coincident Economic Activity Index
Index (1992 = 100)
165
160
155
150
145
Illinois

140

Missouri
135
130
2000

United States

2001

2002

2003

2004

2005

2006

2007

The Philadelphia Fed’s coincident index
combines payroll employment, wages and
salaries, the unemployment rate, and hours
worked into a single index. According to this
index, Missouri and Illinois have underperformed the country as a whole since
2001. The recession of 2001 in these
states was deeper and longer, and the
subsequent recovery and expansion were
not as strong. In 2007 this index rose by
2.4 percent nationally, but only 1.4 and
0.5 percent for Illinois and Missouri,
respectively.

SOURCE: Federal Reserve Bank of Philadelphia.

St. Louis Area Real Personal Income Growth
Percent Change, Year-Over-Year
Percent
7
6
5
4
3
2
1

Illinois

0

Missouri
United States

–1
–2
2000

2001

2002

SOURCE: Bureau of Economic Analysis.

2003

2004

2005

2006

2007

Personal income growth in Missouri and
Illinois has been weaker than in the country
as a whole since 2003. Also, income growth
in Missouri has been weaker than in Illinois
since the start of 2006. Income growth in
both states has trended toward the national
rate since then. By the fourth quarter of
2006, Illinois’s income growth began to
nearly match the national rate and, by the
third quarter of 2007, so did Missouri’s.

Metro Area Employment Growth
December 2006 to December 2007
Revised estimate as of March 2008
Change (in thousands)
Large metro areas
Little Rock–North Little Rock, Arkansas
Louisville, Kentucky-Indiana
Memphis, Tennessee-Arkansas-Mississippi
St. Louis, Missouri-Illinois
Small and medium metro areas
Fayetteville-Springdale-Rogers, Arkansas
Fort Smith, Arkansas-Oklahoma
Texarkana, Texas-Arkansas
Bowling Green, Kentucky
Evansville, Indiana-Kentucky
Jackson, Tennessee
Columbia, Missouri
Jefferson City, Missouri
Springfield, Missouri

Percent change

5.2
6.9
5.4
2.0

1.5
1.1
0.8
0.1

0.9
1.7
0.7
1.8
1.4
0.3
1.0
1.5
5.2

0.4
1.4
1.2
2.9
0.8
0.5
1.1
1.9
2.6

NOTE: These are the most recent benchmark revisions from March 11, 2008. See CRE8 Occasional Paper #2008-01 for a discussion
of these revisions (http://research.stlouisfed.org/regecon/occasionalpapers.html).
SOURCE: Bureau of Labor Statistics.

Foreclosures, 2007
Percentage of
households, 2007

Percent change
from 2006

Little Rock–North Little Rock, Arkansas
Louisville, Kentucky-Indiana
Memphis, Tennessee-Arkansas-Mississippi
St. Louis, Missouri-Illinois

0.95
0.60
2.14
1.28

15.52
–12.05
30.35
58.11

Arkansas
Ilinois
Indiana
Kentucky
Mississippi
Missouri
Tennessee

0.51
1.25
1.03
0.27
0.11
0.91
0.98

26.44
25.29
11.31
23.45
91.65
80.93
24.56

United States

1.03

74.99

SOURCE: Realty Trac.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102