Full text of Eighth District Beige Book : November 2019

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The

Beige Book
Eighth District ■ November 2019

Summary of Economic Activity
Economic conditions have been mixed but generally unchanged since our previous report. Contacts across multiple
industries continued to note a heightened sense of economic uncertainty. There was a slight uptick in employment.
Wage increases were widespread and higher than in previous years for the vast majority of firms. Contacts continued to
report only a slight uptick in prices charged to consumers despite moderate increases to nonlabor input costs. Reports
from manufacturing firms were mixed. Agriculture conditions remained strained by low crop prices and generally poor
production and yields. Across all industries, the outlook among surveyed contacts remained slightly pessimistic; on net,
12 percent of respondents expect conditions during 2020 to be worse or somewhat worse than in 2019.

Employment and Wages

Prices

Employment has increased slightly since the previous
reporting period. On net, 11 percent of survey respondents reported that employment was higher than a year
ago, and 41 percent, on net, expect to hire additional
workers over the next 12 months. Labor market tightness
persisted across the District; on net, 34 percent of contacts reported difficulty finding qualified workers. Firms
continued to deal with worker scarcity by raising benefits,
lowering hiring standards, investing in technology, and/or
retraining existing employees. Employment conditions in
manufacturing remained more subdued. Fifty-seven
percent of manufacturing contacts reported a desire to
hire more workers, but other survey-based results
showed slight employment declines in the sector.

Prices have increased slightly since the previous report.
On net, just 6 percent of business contacts reported that
prices charged to consumers increased in the current
quarter relative to the same time last year. This is the
fifth consecutive survey in which the share reporting
higher selling prices has declined. Despite the reported
softness in prices charged to consumers, firms’ input
costs continued to increase at a moderate rate. On net,
32 percent of business contacts reported higher nonlabor costs, the same share as in the previous quarter.
Business contacts in retail and manufacturing reported
facing increased price pressures due to tariffs.

Consumer Spending
Reports from general retailers, auto dealers, and hoteliers indicate that consumer activity has been mixed since
the previous report. October real sales tax collections
increased in Arkansas and Kentucky but were flat in
Missouri relative to a year ago. September real sales tax
collections increased in West Tennessee relative to a
year ago. General retailers reported that sales have
been about the same or slightly lower than this time last
year, and their outlook on future economic conditions
has turned pessimistic. Most surveyed auto dealers
reported that sales have been about the same as this
time last year but have fallen short of expectations, citing

The tight labor market has continued to put upward
pressure on wages, which have increased moderately
since the previous report. On net, 38 percent of survey
respondents indicated that wages were higher than a
year ago. Seventy-four percent of those seeking to hire
new workers reported raising wages for some or most
job categories, and 63 percent of all contacts reported
raising wages for existing employees by more than they
have in the past few years.

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Federal Reserve Bank of St. Louis
rising prices as deterrents to consumer confidence.
Multiple dealers continued to note seeing an increased
preference for used and low-end vehicles. Hospitality
contacts in the St. Louis region shared mixed accounts
of recent tourism activity relative to a year ago but remained optimistic about the coming months.

Builders in the St. Louis area expect an uptick in activity
in the near future due to lower mortgage rates and a
reduction in home inventory.
Commercial real estate activity has increased slightly
since the previous report. Survey respondents reported a
slight increase in demand for office space relative to one
year ago, a slight decrease in demand for retail space,
and no change in demand for industrial space. Contacts,
on net, also noted slightly higher demand for multifamily
properties.

Manufacturing
Manufacturing activity has been mixed since our previous report. For the second consecutive quarter, a majority of survey respondents reported declines in production,
new orders, and capacity utilization relative to one year
ago. Makers of vehicle parts noted that a slowdown in
the automotive industry has negatively impacted sales.
However, survey-based indexes indicate that manufacturing activity overall expanded slightly in Arkansas and
Missouri from September to October, with new orders
and production increasing moderately in both states.
Contacts were slightly optimistic about the future; on net,
most survey respondents expect manufacturing conditions to improve slightly in the first quarter of 2020.

Commercial construction activity was mixed. Survey
respondents reported higher demand for office and
industrial property construction. However, there were
some reports of firms putting future projects on hold
because of economic uncertainty.

Banking and Finance
Banking conditions in the District have experienced little
change since the previous report. Demand for mortgages and auto loans decreased slightly relative to one year
ago, and demand for commercial and industry loans fell
modestly. However, there was a sharp increase in credit
card borrowing relative to the same time last year. Bankers expect a slight increase in total loan demand in the
first quarter of 2020. Credit standards tightened overall
compared with year-ago levels. Delinquencies were flat
on a year-over-year basis but are expected to increase
moderately in the first quarter of 2020.

Nonfinancial Services
Activity in the services sector has improved modestly
since the previous report. On net, around 40 percent of
survey respondents reported higher sales compared with
the same time last year, and 45 percent expect this
growth to continue into the first quarter of 2020. However, nearly a third of contacts noted that sales halfway
through the fourth quarter have fallen short of expectations, which some credited to increased economic uncertainty. Transportation activity has been mixed since the
previous report. Trucking contacts reported that lackluster demand for freight transportation has put downward
pressure on prices. Barge traffic in Little Rock exceeded
expectations in the first half of the fourth quarter.

Agriculture and Natural Resources
District agriculture conditions have remained unchanged
from the previous reporting period and well below those
from a year ago. Corn and soybean yield forecasts increased from October, while cotton yield forecasts have
declined modestly. All three crops and rice are projected
to have lower yields than last year. Production forecasts
for corn, cotton, and soybeans have increased slightly
since the previous report. Production levels for corn, rice,
and soybeans are expected to be significantly lower than
in 2018, while that for cotton is expected to increase
modestly. District contacts continued to express concerns over depressed agriculture commodity prices.

Real Estate and Construction
Residential real estate activity has been mixed since the
previous report. Seasonally adjusted home sales increased slightly from August to September in Little Rock,
Louisville, and Memphis but decreased slightly in St.
Louis. On net, 10 percent of survey respondents reported a decrease in demand for single-family homes relative to a year ago, and some contacts noted that fourthquarter sales have fallen short of expectations. Inventory
levels remained depressed.

Natural resource extraction conditions declined modestly
from September to October, with seasonally adjusted
production declining by nearly 4 percent. October production decreased 8 percent from a year ago.

Residential construction activity increased slightly. There
was a slight uptick in September permit activity across
District MSAs relative to the previous month. On net, 10
percent of survey respondents reported higher construction activity compared with the same time last year, and
20 percent expect continued growth in the next quarter.

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Federal Reserve Bank of St. Louis
Seasonally adjusted home sales ticked up slightly from
August to September. Single-family building permits
increased robustly over the same time period.

Highlights by Zone
The Beige Book report provides an overview of economic conditions in the Eighth District based on information received from business contacts. Because aggregating zone data to the District level sometimes
masks variations in conditions within the District, the
summaries below are by zone: The headquarters office
is in St. Louis and the branch offices are in Little Rock,
Louisville, and Memphis.

The overall outlook among contacts remained slightly
optimistic. On net, 17 percent of contacts expect regional
economic conditions in 2020 to be better than in 2019.

Louisville Zone
Economic conditions in the Louisville zone are little
changed since our previous report. Kentucky real sales
tax revenue in October increased modestly from a year
ago. A local auto dealer reported sales falling short of
expectations due to weak demand.
Seasonally adjusted home sales increased slightly from
August to September. However, some local contacts
reported that the typical seasonal slowdown in sales
activity has arrived earlier than expected. Moderately
priced single-family housing remained in high demand.
Building permits were relatively unchanged from August
to September. A local contact noted that construction
costs continue to increase.
Manufacturing contacts reported that sales have fallen
short of expectations halfway through the fourth quarter,
citing a slowdown in economic activity. They generally
noted a slight decrease in production, capacity utilization, and new orders relative to a year ago.
The overall outlook among contacts has remained slightly pessimistic. Across all industries, 19 percent of contacts, on net, expect regional economic conditions during
2020 to worsen relative to 2019.

Memphis Zone
Economic conditions in the Memphis zone have
strengthened slightly since our previous report. West
Tennessee real taxable sales increased slightly in September from the same time last year.

Little Rock Zone
Economic conditions in the Little Rock zone have
strengthened slightly since our previous report. Arkansas
real sales tax revenue increased modestly in October
from a year ago. A Little Rock area auto dealer reported
that lower interest rates have improved spending activity.
Firms reported a modest increase in employment relative
to a year ago. Wage growth was also modest. On net, 17
percent of survey respondents reported that wages were
higher than the same time last year. Half of firms seeking
to increase employment reported raising wages to attract
new hires.
Survey-based indexes indicate that overall manufacturing activity expanded slightly in the state of Arkansas
from September to October. New orders and production
increased moderately over the same time frame.

Firms reported that employment levels were about the
same relative to a year ago as labor market conditions
remained tight. Finding qualified candidates continued to
be a significant issue for those hiring workers. Wage
growth was moderate. On net, about a third of survey
respondents reported that wages were higher than a
year ago.
Seasonally adjusted home sales increased modestly
from August to September. Single-family building permits
also increased modestly over the same time period.
The overall outlook among contacts was neutral. On net,
contacts expect regional economic conditions during
2020 to be about the same as in 2019.

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Federal Reserve Bank of St. Louis

St. Louis Zone
Economic conditions in the St. Louis zone are broadly
unchanged since the previous report. Missouri real sales
tax revenue in October was flat from the same time last
year. Auto dealers reported that sales were about the
same as a year ago but fell below expectations.
Seasonally adjusted home sales decreased slightly from
August to September. Half of surveyed real estate contacts reported that sales midway through the fourth quarter have fallen short of expectations. Inventory shortages
continued to plague the industry.
Building permits increased slightly from August to September. A construction contact reported that costs for
materials and labor have been higher than expected.
Builders expect an uptick in activity in the near future due
to lower mortgage rates and a reduction in home inventory.
Survey-based indexes indicate that overall manufacturing activity expanded slightly in the state of Missouri from
September to October. New orders and production increased moderately over the same time frame. However,
reports from local manufacturing contacts indicated
mixed levels of activity.
The overall outlook among contacts remained slightly
pessimistic. On net, 15 percent of contacts expect regional economic conditions during 2020 to worsen relative to 2019. ■

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Federal Reserve Bank of St. Louis
Have sales at this point in the current
quarter met expectations?

Supplemental Data and Survey Results
Anecdotal information in this report was provided by our
panel of business contacts, who were surveyed between
October 28 and November 5. The previous survey was
conducted between August 5 and August 19. The following are selected results from those surveys.

80

Previous Survey

70

Percent of Responses

How do you expect local economic conditions to
change during the remainder of this year?
40
30

Net Percentage

One Year Ago

20

Current Survey

60

50
40
30

20
10

10

0

No, fell short of Met expectations No, exceeded
expectations
expectations

0
-10

How do you expect each of the following measures to
change at your firm relative to the same time last
year?

8th District

Oct-19

Dec-18

May-19

Jul-18

Feb-18

Apr-17

Sep-17

Nov-16

Jun-16

Jan-16

Aug-15

Mar-15

Previous
Survey

Current
Survey

Prices Charged to Customers

13%

6%

Sales (Dollars)

14%

11%

Inventory

-8%

-24%

50

Nonlabor Costs

32%

32%

40

Capital Expenditures

15%

13%

30

Labor Costs

41%

35%

20

Wages

40%

38%

10

Hours per Employee

6%

14%

12%

11%

80
70
60

Percent of Responses

Oct-14

May-14

-20

Little Rock Zone

Louisville Zone
Memphis Zone
St. Louis Zone

Employment

0
Worse

Slightly About the Slightly
worse
same
better

Better

Notes: Values are reported as the net percentage of respondents reporting increases. Responses are weighted
as follows: increase (+1), slightly increase (+0.5), decrease (-1), and slightly decrease (-0.5). Values greater
than zero indicate a net increase from one year ago,
while values less than zero indicate a net decrease from
one year ago.

Note: Interactive versions of these charts can be found
at: https://research.stlouisfed.org/publications/regional/
beige-book.

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Federal Reserve Bank of St. Louis

Disclaimer

What is the Eighth Federal Reserve District?
The Federal Reserve Bank of St. Louis is the headquarters for the Eighth Federal Reserve District, also known
as District 8H. With Branches in Little Rock, Louisville,
and Memphis, the District serves approximately 14.8
million people in the four zones that span all of Arkansas
and parts of the six states of Missouri, Mississippi, Tennessee, Kentucky, Indiana, and Illinois.

This document summarizes comments received from
contacts outside the Federal Reserve System and is not
a commentary on the views of Federal Reserve officials.

Frequently Asked Questions
What is The Beige Book?

The Federal Reserve Bank of St. Louis is one of 12
regional Reserve Banks in the United States that, together with the Board of Governors in Washington, D.C.,
make up the Federal Reserve System—the nation's
central bank. The St. Louis Fed and the other regional
Reserve Banks help formulate monetary policy, supervise and regulate banks and bank holding companies,
and provide financial services to depository institutions
and the federal government.

The Beige Book is a Federal Reserve System publication about current economic conditions across the 12
Federal Reserve Districts. It characterizes regional economic conditions and prospects based on a variety of
mostly qualitative information, gathered directly from
District sources.
The qualitative nature of the Beige Book creates an
opportunity to characterize dynamics and identify emerging trends in the economy that may not be readily apparent in the available economic data. Because this information is collected from a wide range of business and
community contacts through a variety of formal and
informal methods, the Beige Book can complement other
forms of regional information gathering.

Join Our Panel of Business Contacts
The anecdotal information in this report was provided by
our panel of business contacts. If you’re interested in
becoming a member of our panel, follow this link to
complete a trial survey:

How is the information collected?
Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District
through reports from Bank and Branch directors, plus
phone and in-person interviews with and online questionnaires completed by businesses, community contacts,
economists, market experts, and other sources.

bit.ly/stlecon

How is the information used?

Media inquiries

Or email us at beigebook@stls.frb.org.

For more information, contact the St. Louis office:
Charles Gascon
charles.s.gascon@stls.frb.org

The anecdotal information collected in the Beige Book
supplements the data and analysis used by Federal
Reserve economists and staff to assess economic conditions in the Federal Reserve Districts. This information
enables comparison of economic conditions in different
parts of the country, which can be helpful for assessing
the outlook for the national economy. The Beige Book
also serves as a regular summary of the Federal Reserve System’s efforts to listen to businesses and community organizations.

mediainquiries@stls.frb.org

Where can I find other Federal Reserve District
Reports?
All current and past versions of the Beige Book are
available on the Federal Reserve Board of Governors
website: www.federalreserve.gov/monetarypolicy/
beigebook/.

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