Economy continues to contract in Fed's eighth district

The economy of the Federal Reserve's eighth district, which includes southwest Missouri, continued to weaken in January and early February, according to the latest Beige Book report.

The Beige Book is issued eight times a year and is based on anecdotal information on current economic conditions collected from business contacts, economists and market experts.

In retail, about 63 percent of stores said their sales declined, while 33 percent saw increases. Apparel items were strong sellers, while furniture moved more slowly. About 72 percent of retailers expect sales in March and April to be less than in 2008.

Car dealers reported that sales were down, and nearly half reported that their inventories were too high, mostly for new cars. About 62 percent of car dealers expect March and April sales to be down.

Several manufacturers in the district reported plans to reduce operations and lay off workers, while fewer said they plan to open plants and expand.

Firms in the auto parts, steel products, electrical equipment, primary metal and wood products industries said they expect to lay off workers because of weak product demand. Firms in heavy machinery and household appliance manufacturing reported plans to open new facilities, and firms in plastics/rubber products and airplane manufacturing industries said they plan to expand existing facilities.

The services sectors continued to decline. Firms in leisure/hospitality, business support, education, transportation, medical and information services eliminated jobs or reduced payroll expenses by cutting pay or requiring time off without pay. Two contacts in the financial services industry, however, said they plan to expand operations and hire more workers.

Homes sales were down about 25 percent on average in most districts. December 2008 year-to-date single-family housing permits were down in nearly all metropolitan areas compared to 2007. Commercial real estate market conditions, meanwhile, were mixed across the district.

Large banks in the district reported a moderate decrease in overall lending activity in fourth-quarter 2008. Credit standards for commercial and industrial loans tightened somewhat, and demand for those loans was moderately weaker. For consumer loans, credit standards ranged from unchanged to somewhat tightened, and demand for those loans grew moderately.[[In-content Ad]]