>>SOUTHERN INDIANA — An annual federal report released Wednesday showed economic conditions in the Louisville region were mixed, but there were some signs of progress last year.
The Federal Reserve’s Beige Book breaks down the financial environment based on districts, with Louisville and Southern Indiana falling into the St. Louis category. The study spanned from February of 2009 to February of this year.
According to the report, manufacturing activity increased in 2009 compared to 2008, while retail sales declined as the services sector waned in the St. Louis district. Of those surveyed, 52 percent of retailers saw a decline in sales and 32 percent saw an increase.
“The report indicated that lower priced items were big sellers and high priced items moved slowly,” said Uric Dufrene, Sanders chair of the Indiana University Southeast Business department. “This is further evidence of the changing consumer. Frugality is going to persist longer than the official ending date of recession.”
Dufrene has maintained for more than a year that economic recovery and growth would be slow. But he said retailers seem to be hopeful, with 54 percent of those surveyed saying they expect an increase in sales for the remainder of the year in the St. Louis district. Dufrene said the retrenched consumer is tied to the jobless rate, which continues to be elevated compared to 2008.
“As consumers gain more confidence, spending will follow,” he said. “But before consumers gain confidence, we will need to see a significant decline in the unemployment rate, and higher values in the stock market and home prices.”
Despite a GDP increase for the fourth quarter of 2009, Dufrene said lending has still declined in the district even with more stability in the banking sector.
“I think what we are seeing is that the supply of credit may be available, but the demand for credit is not,” he said. “Both consumers and business will continue to be very cautious about taking on more debt.”
Downtown office vacancies and industrial space vacancies were up in Louisville Metro, though other cities in the St. Louis district saw decreases in those sectors. Manufacturing activity was a bright spot in the district. Dufrene said that’s consistent with what’s being experienced locally as job losses have decelerated in the sector since last June.
Last month, the nation gained 11,000 manufacturing jobs. But even the good news could be short lived, Dufrene warned.
“Recessionary gains in productivity will challenge manufacturing employment growth,” he said. “Employers have been able to do more with fewer employees, and this is going to impact the number of people who are ultimately called back.”
