WASHINGTON (MNI) – The following is the text of the Federal
Reserve’s Beige Book survey Eighth District summary, published
Wednesday:

EIGHTH DISTRICT- ST. LOUIS

Summary

Economic activity in the Eighth District has increased modestly
since our previous report. Manufacturing activity increased on balance,
while activity in the services sector was mixed. Retail and auto sales
in April and early May increased over a year ago. Residential real
estate market conditions improved throughout the District, while
commercial and industrial market conditions continued to lag behind.
Overall lending activity at a sample of large District banks increased
modestly in the first quarter of 2010 compared with the fourth quarter
of 2009.

Consumer Spending

Contacts reported that retail sales in April and early May were up,
on average, over year-earlier levels. About 52 percent of the retailers
saw increases in sales, while 36 percent saw decreases and 12 percent
saw no changes. About 41 percent of the respondents noted that sales
levels met their expectations, 32 percent reported that sales were below
expectations, and 27 percent reported that sales were above
expectations. Lower-priced items, apparel, and shoes were strong
sellers, while higher-priced items and gifts moved more slowly. About 61
percent of the contacts noted that inventories were at desired levels,
while 27 percent reported too-high inventories and 12 percent reported
too-low inventories. The sales outlook among the retailers for this
summer was mostly optimistic. About 73 percent of the retailers expect
sales to increase over 2009 levels, while 23 percent expect sales to
decrease and 4 percent expect sales to be similar to last year.

Car dealers in the District reported that, compared with last year,
sales in April and early May were up, on average. About 64 percent of
the car dealers surveyed saw increases in sales, while 9 percent saw
decreases and 27 percent saw no changes. About 33 percent of the car
dealers noted that used car sales had increased relative to new car
sales, while 29 percent reported the opposite. Also, 25 percent reported
an increase in high-end vehicle sales relative to low-end vehicle sales,
while 13 percent reported the opposite. About 38 percent of contacts
reported more acceptances of finance applications, but 17 percent
reported more rejections. About half of the car dealers surveyed
reported that their inventories were too low (mostly on new vehicles),
while 8 percent reported that their inventories were too high. The sales
outlook among the car dealers for this summer was generally optimistic.
About 67 percent of the car dealers expect sales to increase over 2009
levels, but 12 percent expect sales to decrease. The remaining 21
percent expect sales to be similar to last year.

Manufacturing and Other Business Activity

Manufacturing activity has increased since our previous report. A
greater number of contacts reported new hires and plant openings than
reported job layoffs and plant closings. Firms in the fabricated metal
product, office supplies, plastics product, and hand and edge tool
manufacturing industries reported plans to expand operations and hire
new employees. A major firm in semiconductor and related device
manufacturing announced a significant amount of new hires along with the
opening of a new plant. Two smaller firms in primary metal manufacturing
also announced plans to open a new plant in the District and expand
employment. In contrast, firms in synthetic dye and pigment
manufacturing and pharmaceutical and medicine manufacturing reported
plans to lay off workers and decrease operations.

The District’s services sector activity has been mixed since our
previous report. A firm in business support services announced job
layoffs in response to decreased demand. A major electrical utility
announced layoffs at several power plants and support service
facilities. Several regional government agencies and education services
providers announced job cuts in response to budgets cuts. In contrast, a
major firm in the telecommunications industry announced that it will
lose significantly fewer employees from a recent merger than previously
expected. Additionally, a firm in the rail transportation industry
announced plans to make significant capital improvements to the rail
network.

Real Estate and Construction

Home sales increased in many areas of the Eighth District. Compared
with the same period in 2009, April 2010 year-to-date home sales were up
25 percent in Louisville, 19 percent in Little Rock, and 9 percent in
St. Louis. Home sales declined 2 percent in Memphis over the same
period. Several contacts noted, however, that part of the increase was
likely the result of the expiring home buyer tax credit. Residential
construction continued to improve throughout the District. April 2010
year-to-date singlefamily housing permits increased in nearly all
District metro areas compared with the same period in 2009. Permits
increased 65 percent in Memphis, 56 percent in St. Louis, 39 percent in
Little Rock, and 38 percent in Louisville.

Commercial and industrial real estate market activity continued to
be slow throughout the District. Compared with the fourth quarter of
2009, first-quarter 2010 industrial vacancy rates decreased in Memphis
but increased in Little Rock, Louisville, and St. Louis. During the same
period, the suburban office vacancy rate increased in Little Rock,
Louisville, and Memphis and remained the same in St. Louis. The downtown
office vacancy rate decreased in Little Rock but increased in
Louisville, Memphis, and St. Louis. Several contacts throughout the
District reported that commercial and industrial construction is at a
standstill and is not expected to pick up until sometime in 2011.

Banking and Finance

A survey of senior loan officers at a sample of District banks
showed a modest increase in overall lending activity in the first
quarter of 2010 relative to the fourth quarter of 2009. During this
period, credit standards for commercial and industrial loans remained
basically unchanged, while demand for these loans varied slightly from
moderately weaker to moderately stronger. Credit standards for
commercial real estate loans ranged from unchanged to tightened
somewhat, while demand for these loans was moderately stronger. Credit
standards for consumer loans remained basically unchanged, while demand
was about the same. Credit standards for residential mortgages were
unchanged, while demand for these loans ranged from about the same to
moderately stronger.

Agriculture and Natural Resources

Recent rains throughout the District caused some fieldwork delays.
Planting of corn, cotton, and rice was ahead of its 5-year average pace,
while planting of soybeans and sorghum was behind normal pace in most
District states. Emergence of these crops was ahead of normal in most
cases. About twothirds of the winter wheat in Illinois and Missouri and
at least 90 percent in the other District states were rated in fair or
better condition.

** Market News International Washington Bureau: 202-371-2121 **

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