For release: April 5, 2007

St. Louis Fed’s The Regional Economist: Housing Slump Could Lean Heavily on Economy; Deregulation Helps Small Business Owners Stabilize Their Income; Growth in China and India Spurs Oil Price Increases; Community Profile: Murray, Ky.

ST. LOUIS, Mo. — The April edition of The Regional Economist, the Federal Reserve Bank of St. Louis' quarterly publication of economic and business issues, features the following articles. (The publication is also available on the Bank's web site: http://stlouisfed.org/publications/re/default.html.)

• "Housing Slump Could Lean Heavily on Economy." Some house price booms of the past were followed by large price declines, and some economic analysts have been predicting a collapse of housing prices for some time. That, in turn, could have a severe impact on consumer spending. Economist David C. Wheelock analyzes the data and finds that some booms simply fizzled out into extended periods of flat or slowly rising prices. Wheelock also notes that banking supervisors are keeping a close watch on banks' exposure to real estate, while policymakers, including those at the Federal Reserve, are monitoring any signs that a housing slump would lead to a broader impact on the economy.
• "Deregulation Helps Small Business Owners." Economists Yuliya Demyanyk, Bent E. Sorensen and Charlotte Ostergaard analyze the effects of deregulation of state-level banking and branching. They find that the banking industry became more integrated, more competitive and more geographically diversified after deregulation, which, in turn, helped to stabilize small businesses' income. They suggest two possible ways that the latter occurred. First, the level of bank lending to businesses may have increased as more efficient banks were better able to screen business projects. Second, banks may have been able to improve existing relationships with business borrowers, a benefit of which would have been an increased willingness to extend credit in bad times.
• "Growth in China and India Spurs Oil Price Increases." With prices going up again at the gas pump, the price of petroleum is in the news again. Researcher Justin P. Hauke and economist Christopher J. Neely analyze the factors behind the rising prices. They emphasize that the price depends not only on what happens in the United States, but also on global supply and demand. They note that much of the demand for new energy has come from India and China. They conclude that further growth of these two Asian economies will probably continue to significantly influence oil prices.
• "Community Profile: Murray, Ky." While manufacturing overall in the United States has been on the wane in recent years, Murray, Ky., and the surrounding county have been bulking up, adding 300 jobs in five years. Writer Susan C. Thomson finds that business and community leaders give credit for this growth to everything from the quality of the laborforce to inexpensive electricity to the presence of a business-friendly state university.

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