Statement by Thomas M. Hoenig, President, Federal Reserve Bank of Kansas City, before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, March 10, 1993 - Statements to the Congress - Transcript

Federal Reserve Bulletin, May, 1993

* Oklahoma. Oklahoma has been the District's weakest economy during the recovery. Employment has declined at an annual rate of 0.1 percent since the recovery began. The state's key energy sector remains depressed, even after a mild upturn in drilling late last year. Manufacturing has generally been weak, despite improved auto production in the state during the 1992 model year. Trade and construction activity in the state has sagged during the past two years.

OUTLOOK FOR THE TENTH DISTRICT ECONOMY

I expect the Tenth District economy to grow at a moderate pace in 1993. Preliminary indicators suggest the District economy is off to a good start this year. Retailers report that consumer spending, which picked up toward year-end, has continued to be relatively strong in January and February. Moreover, banks in the District report strengthening loan demand, and farm income is rising slightly.

Survey of Economic Advisory Council

To provide current information on the District's economic prospects, it is useful to highlight a recent survey we conducted of our Tenth District Economic Advisory Council members and to report their expectations for 1993. With representatives from small business, agriculture, labor, and consumer interests, the council serves as a valuable source of economic information throughout our region and provides useful views on the overall stance of Federal Reserve monetary policy (council members are listed in the Appendix).(1)

Our District advisory council is optimistic about the region's economy in 1993. They report improved sales early in the year, both for their firms and in their communities. The sales gains are reported from a diverse mix of firms--from food processors to building materials suppliers.

Most council members expect their profits to improve in 1993 because of both increased sales and further cost cutting. A substantial majority of council members also report a general air of economic optimism in their communities. In line with their expectations, a majority of council members plan to increase capital spending in 1993. Nearly all of the council members that plan to expand spending this year expect credit to be readily available.

Council members also report that employment growth is currently lagging behind other business indicators. The number of firms adding workers so far this year just about equals the number of firms not adding workers. Similarly, council members are evenly divided between those planning to increase employment this year and those planning no new jobs. Only one council member plans to cut jobs in 1993.

Outlook for District Industries

Additional information that points to moderate growth in the District economy in 1993 is the outlook for key District industries. We expect agriculture to remain strong, energy to remain stable, construction to slow, and manufacturing to improve.

* Agriculture. The District farm economy should stay on its recovery course in 1993. Livestock producers' profits are expected to remain strong, but last year's bumper harvest will hold down crop prices. The effect of lower crop prices on farmers' incomes in 1993 will be cushioned by larger sales volumes and bigger government payments to farmers. Farm income may therefore edge up, although there may be little improvement in the industry's already strong balance sheet.