View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

Current Economic Conditions in the

Eighth Federal Reserve District
St. Louis Zone
June 25, 2009

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 (known as the Burgundy Book ) 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 website
(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/2009/).
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:
Joel James, 314-444-8963, joel.h.james@stls.frb.org
Economists:
Tom Garrett, 314-444-8601, tom.a.garrett@stls.frb.org
Subhayu Bandyopadhyay, 314-444-7425, subhayu.bandyopadhyay@stls.frb.org

St. Louis Zone Report—June 25, 2009
Economic activity in the St. Louis zone continued to weaken over the past two months. Most general retailers and car dealers reported
that sales had decreased compared with the same period last year. Overall activity in the manufacturing, services, and real estate
sectors declined. Contacts in the banking industry noted no change in overall lending activity. Reports from the agriculture and
natural resources sector were strong compared with the rest of the zone economy.

Consumer Spending
St. Louis zone retail sales reports for April and early May were
mostly negative among general retailers and car dealers. More
than 80 percent of the general retailers and car dealers surveyed
indicated that sales were down compared with the same months
in 2008. Among general retailers, about 40 percent noted that
sales levels met their expectations and a similar percentage
reported that sales were above what they had anticipated. Onethird of the car dealers noted that used-car sales had increased
relative to new-car sales, but none reported the opposite. The
sales outlook for the summer was mixed among general retailers
but was pessimistic among car dealers. Half of the general
retailers and all of the car dealers expect sales to decrease over
2008 levels, while one-third of the general retailers expect sales
to increase.

Manufacturing and Other Business Activity
Manufacturing output and employment in the St. Louis zone
continued to decline during the second quarter of 2009. Firms
in small engine, auto, steel product, and electrical component
manufacturing all reported job losses and declines in production.
Furthermore, a major auto manufacturing plant in the zone
officially closed. On the other hand, several small-to-midsized
firms in food and beverage manufacturing and furniture manufacturing reported increases in sales and output. As in the manufacturing sector, employment in the service sector continued to
decline. Contacts reported job losses in education services,
government services, information services, and transportation
and warehousing.

Real Estate and Construction
The residential real estate market remained weak in the
St. Louis metro area. Compared with the same months in
2008, March and April 2009 year-to-date home sales each
declined by 13 percent. Compared with the same months in
2008, March 2009 year-to-date single-family housing permits
declined by 45 percent, and April 2009 year-to-date singlefamily housing permits declined by 41 percent. The commercial

side of the real estate market performed relatively better than
the residential side. The first quarter 2009 industrial vacancy
rate was unchanged from the previous quarter. Similarly, the
suburban and downtown office vacancy rates remained fairly
steady. Still, a contact in the St. Louis area noted that the
demand for industrial real estate is waning and that the market
is currently overbuilt.

Banking and Finance
Overall lending activity was relatively unchanged from previous
reporting periods. Contacts reported little to no change in lending activity for consumer loans and commercial and industrial
loans. However, most contacts reported an increase in residential
mortgage lending activity. Commercial real estate lending
activity declined, with contacts noting reduced credit availability
and weaker demand. Whereas reports continue to indicate
tighter credit standards for commercial and industrial loans
and commercial real estate loans, a number of contacts indicated that there has not been any further tightening of credit
standards for residential mortgage loans or consumer loans.
Contacts reported an increase in delinquencies, although to a
lesser extent than earlier in the year.

Agriculture and Natural Resources
Farmers in Illinois and Missouri intended to plant more acres
of corn and fewer acres of soybeans and sorghum this year than
in 2008. Missouri farmers also intended to plant 2 percent
fewer acres of cotton and 13 percent more acres of rice. Frequent wet and cool conditions since early April delayed fieldwork throughout the zone. At the end of May, farmers in the
St. Louis zone were behind their normal planting pace for rice,
corn, soybeans, and sorghum. In Missouri, planting of cotton and
rice was also behind normal, as was rice emergence. About 97
percent of the pastures in Illinois and 98 percent in Missouri
were in fair condition or better, which is roughly equivalent to
the same time last year for Illinois and slightly better than last
year for Missouri.

Employment losses in the St. Louis metro
area were lower than for the country as a
whole during the first five months of 2009.
For the period January 2009 to May 2009,
average monthly employment growth was
–0.37 in the St. Louis metro area compared
with –0.45 percent for the United States.
Similarly, for the last six months of 2008,
average monthly employment growth in
the St. Louis area was –0.15 percent
compared with –0.22 percent for the
United States.

Nonfarm Payroll Employment Growth
3-Month Average, SA, January 2001–May 2009
Percent
0.4
0.3
0.2
0.1
0
–0.1
–0.2
–0.3
–0.4
United States
St. Louis MSA

–0.5
–0.6
2001

2002

2003

2004

2005

2006

2007

2008

2009

Sector-specific employment growth in the
St. Louis metro area between May 2008 and
May 2009 was mixed, although the majority
of sectors experienced negative growth. The
government sector, along with the education
and health sector, experienced annual job
growth of 0.8 percent and 1.8 percent,
respectively. The remaining sectors experienced job losses, with the natural resources,
“other services,” and manufacturing sectors
seeing the greatest percentage losses.
Employment growth in these sectors declined
by –10.9 percent, –9.3 percent, and –10
percent, respectively.

St. Louis MSA Employment Growth by Sector
Year/Year Percent Change, May 2008–May 2009
Percent
4.0
2.0
0.0
–2.0
–4.0
–6.0
–8.0
–10.0
–12.0

Total
Nonfarm

Natural Manufacturing Trade, Information Financial Professional Education
Transportation,
Activities
and
and
Resources,
Mining, and
and Utilities
Business
Health
Construction
Services

Leisure
and
Hospitality

Other
Services

Government

St. Louis Zone—MSA Employment and Unemployment
Nonfarm payroll employment percent change,
May 2008–May 2009
Total
St. Louis
Columbia, Mo.
Jefferson City, Mo.
Springfield, Mo.
United States

–3.29
–1.17
–3.35
–2.28
–3.95

SOURCE: Bureau of Labor Statistics.

Goods producing
–10.33
–7.23
–9.62
–13.00
–12.11

Service providing

Unemployment rate
April 2009

–2.00
–0.58
–2.42
–0.57
–2.44

8.0
4.8
6.2
7.0
8.6

St. Louis Zone—MSA Housing Activity
Total building permits,
units year-to-date
Percent change
–43.8
–1.2
13.9
–66.9
–48.2

April 2009
St. Louis
1,201
Columbia, Mo.
250
Jefferson City, Mo.
41
Springfield, Mo.
223
United States
166,319

House price index,
percent change,
2009:Q1/2008:Q1
–1.04
–0.32
0.51
–0.32
–3.35

SOURCE: Bureau of the Census, Federal Housing Financing Authority.

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

Missouri
United States

155
150
145
140
135
130
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Total residential building permits in April
were significantly lower than a year earlier
in every zone metro area except Jefferson
City (+13.9 percent). Building permits
declined by 44 percent in St. Louis compared with a decline of 48 percent for the
United States. House price indices decreased
in all but one of the metro areas (Jefferson
City) between the first quarters of 2008
and 2009. However, the decrease in house
prices for zone metro areas was less than
the nearly 3.4 percent decline for the
country as a whole.
The Philadelphia Fed’s coincident index
combines payroll employment, wages and
salaries, the unemployment rate, and hours
worked into a single index of economic
performance. According to this index,
Missouri and Illinois have underperformed
relative to the country as a whole since
2003. This is partly due to losses in the
relatively larger manufacturing sector
present in Missouri and Illinois. Over the
first four months of 2009, the index for the
United States fell by 1.4 percent, while it
fell by 2.9 percent and 0.9 percent for
Illinois and Missouri, respectively.

SOURCE: Federal Reserve Bank of Philadelphia.

Personal income growth in Missouri and
Illinois had been weaker than that of the
country as a whole since 2003, and income
growth in Missouri had been weaker than
in Illinois through most of 2006 and 2007.
More recently, however, Missouri’s income
growth has outpaced that of Illinois and
the country. For the first quarter of 2009,
personal income growth was about 2.1
percent in Missouri, compared with –0.2
percent in Illinois and 0.05 percent in the
United States.

St. Louis Area Real Personal Income Growth
Percent Change, Year/Year
Percent
7

Illinois

6

Missouri
United States

5
4
3
2
1
0
–1
–2
2000

2001

2002

2003

SOURCE: Bureau of Economic Analysis.

2004

2005

2006

2007

2008

2009

Bank Conditions in Eighth District Metro Areas
2008:Q1 (%)
Return on Average Assets
St. Louis
Little Rock
Louisville
Memphis
Net Interest Margin
St. Louis
Little Rock
Louisville
Memphis
Loan Loss Provision
St. Louis
Little Rock
Louisville
Memphis
Nonperforming Loans
St. Louis
Little Rock
Louisville
Memphis

2008:Q4 (%)

2009:Q1 (%)

0.66
1.04
1.45
0.21

–0.42
0.72
0.90
–0.55

–0.97
0.56
1.15
–0.65

3.54
3.85
4.34
3.02

3.40
3.98
3.89
3.10

3.06
4.21
5.01
3.05

0.63
0.38
0.54
2.37

1.48
0.87
0.43
2.89

1.56
1.23
1.06
3.54

1.62
1.14
1.28
3.02

2.44
1.53
1.34
4.99

2.96
2.33
1.70
6.12

NOTE: Variable definitions:
Return on Average Assets = (Net Income/Average Assets) × 100
Net Interest Margin = (Tax Equivalent Net Interest Income/Average Earning Assets) × 100
Loan Loss Provision = (Provision for Loan Losses/Average Assets) × 100
Nonperforming Loans = (Nonperforming Loans/Total Loans) × 100
SOURCE: Reports of Condition and Income for Commercial Banks.
For additional statistics and information on bank conditions in the Eighth District, see
“Slump Persists for District and U.S. Banks.” Central Banker, Summer 2009, p. 3.
Available at http://www.stlouisfed.org/publications/cb/2009/b/pages/quarterly_report.cfm.

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