Fed: Economic activity declines but at slower pace

The economy in the Federal Reserve's eighth district, which includes Springfield, continued to deteriorate in the second quarter but at a slower pace than before, 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 the manufacturing sector, several employers reported plans to close plants or reduce operations, but a similar number said they planned to open plants or expand in the near future.

Firms in aerospace product manufacturing, electrical equipment manufacturing and frozen food manufacturing reported plans to cut back, while a paint/adhesive manufacturing firm said it would close a plant and automotive manufacturers furloughed workers. Meanwhile, firms in furniture manufacturing, fabricated metal product manufacturing, plastic and paper product manufacturing, and rail technology manufacturing said they would expand.

In the services industry, contacts in education, information, business support and medical industries announced job cuts. Contacts in government and health/social services planned to hire more workers, and some firms said they take on temporary employees using funds from the federal economic stimulus.

Small retailers used promotions and discounts to counteract slower traffic, but a major big-box retailer in the district experienced growth by targeting higher-income consumers. Auto dealers' reports were mixed, as several franchise owners went out of business or converted to used cars or service and repair services, while smaller cars continued to sell well.

Home sales continued to decline, as did residential and commercial construction. Single-family housing permits were down in nearly all metropolitan areas of the district. Contacts said little commercial construction is taking place, with the exception of institutional- and health care-related projects.

At a sample of banks in the district, total loans outstanding fell 1.3 percent since April. Real estate lending dropped 0.9 percent, and commercial and industrial loans declined 3.4 percent. Loans to individuals were down 3 percent. Total deposits, however, increased 0.6 percent.

Most major crops in the district remained behind the five-year average pace. In mid-summer, the overall condition of soybeans improved from last year, but conditions of sorghum, rice and cotton were slightly worse. Farmers say they plan to harvest more acres of corn for grain, soybeans and rice than 2008 but fewer acres of sorghum for grain. Total winter wheat production is expected to be down 41 percent from last year's bumper crop.