October 21, 1975
Entering the final months of 1975, the district's economy appears to be improving, despite continuing poor performance in a few key sectors. Retail spending picked up markedly in early summer. Farm income prospects have been fair to good, and labor market conditions have stabilized. Bank loan growth has recently improved, but savings deposit growth at district commercial banks and savings and loan associations slowed somewhat during the third quarter. Construction and manufacturing activity, however, have not yet begun to recover.
Minnesota retail sales rose sharply in May and remained at high levels through July. According to retailers' reports this sales upturn continued at a slower rate into August and September. Home appliances have been selling, and clothing sales have been good. Back-to-school promotions did extremely well in some stores, depleting inventories, while promotions in other stores were disappointing. Inventories are being kept in close check, and retailers generally expect sales to continue to increase this fall.
Although still down from a year ago, recent district automobile sales have continued stronger than national sales. However, this region's share of the national market has dropped from last year's peak and is approaching the traditional level. Last year at this time the price increase on 1975 models spurred very strong sales of the remaining 1974 models. This year dealers reported generally weak sales of the remaining 1975 models. Dealers attributed this to the fact that the price increases this year are not as large as last year and that there is a substantial increase in gasoline mileage on the 1976 models.
The district's summer tourist business was excellent. The number of tourists was up throughout the district, and many resort owners reported improved profits. Expectations for winter business are good: advance reservations at some resorts are already ahead of a year earlier.
Total district cash farm receipts for the first half of 1975 were down sharply from 1974 but remained above 1973 levels. Future receipts from crop marketing should remain fairly high since prices have been strong and district prospects have indicated improved harvests over last year. On the livestock side, feedlot operators remain hesitant to expand, though the third quarter did see a modest increase in the number of cattle on feed.
The sharp rise in district unemployment earlier this year appears to be ending. In July-August the district's unemployment rate, seasonally adjusted, was 6.8 percent and was up only 0.1 percent from the second quarter. This contrasted to 0.6 and 1.1 percent increases in the first and second quarters. This summer's marked increase in district "Help Wanted" advertising reflected the recent improvement in district labor market conditions. Manufacturing employment continued to decline this summer, though at a slower rate, and initial claims remained substantially above a year ago.
The second-quarter pickup in homebuilding was not sustained in the third quarter. Housing unit authorizations in July-August only matched second-quarter levels. Recent figures, though improved from the beginning of this year, were well below the numbers issued in the early 1970s. Also, district nonresidential building spending remained down from a year ago.
Savings deposit growth at district commercial banks and savings and loan associations slowed somewhat in the third quarter, following rapid growth during the first half of 1975. The slowdown largely reflected the growing attractiveness of U.S. Government Securities, whose yields have risen above the highest rates that savings institutions are permitted to pay. Mortgage loans closed and mortgage loan commitments by district S&Ls continued to climb rapidly in the third quarter. However, if past relationships prevail, S&Ls will soon be scaling back the volume of new loan commitments to match the slower savings growth. Loan growth at district commercial banks strengthened substantially in September from the weak pattern that had existed during 1975.