Fed’s Eighth District reports weakened economy

The report, which covered July and the first half of August, noted declines in several sectors, including services, manufacturing, home construction, lending and auto sales.

The Fed’s Eighth District is based in St. Louis and covers eastern Missouri – including Springfield – all of Arkansas, western Kentucky, western Tennessee, southern Illinois, southern Indiana and northern Mississippi.

Contacts reported that retail sales during the period were flat compared to last year. Essentials and staple food items sold well, while nonessential items and luxury goods sold poorly.

About 80 percent of car dealers reported decreased sales compared to 2007, and 64 percent reported more finance application rejections. Nearly three-quarters of sellers surveyed expect sales to continue to decrease in September and October.

In manufacturing, more firms reported plans to close plants and reduce operations, notably in the auto parts and auto manufacturing sectors. Companies in information, health care and social assistance, warehousing and storage, education, architectural and business support services announced plans to lay off workers.

Home sales continued to decline in the district. July 2008 year-to-date home sales decreased 16 percent in St. Louis, 20 percent in Memphis and 21 percent in Little Rock. Year-to-date single-family housing permits were down 42 percent, 57 percent and 34 percent, respectively, in the same areas.

Credit standards for commercial and industrial loans tightened for both large and small firms, while demand for loans was down slightly. Credit standards for consumer loans also tightened.

The Beige Book, issued eight times a year, is a collection of anecdotal information compiled confidentially from various business and community leaders.