March 25, 1981
In February and early March, business activity in the Ninth District continued to be sluggish. General merchandise sales along with manufacturing investment and production continued to expand modestly; automobile sales were still poor, although they did rebound from January's very depressed level; taconite mining and lumber milling remained at January's low level; and home and winter recreational spending declined. In addition, price declines and drought continued to threaten agricultural producers. Reflecting these weaknesses was the continued sluggishness in bank lending.
Consumer Spending
Consumer spending remained slack. Bank directors state that auto
sales remained poor in February and early March, but they did
rebound from January's very depressed level. The Minneapolis/St.
Paul regional sales offices of domestic automobile manufacturers
report a 22 percent increase in car and truck sales between January
and February. Other consumer spending either failed to pick up or
declined. General merchandise sales, according to Bank directors,
continued to advance at January's slow pace, and home sales
declined. In February and early March, mortgage loan applications at
Minneapolis/St. Paul area S&Ls were down 28 percent from January's
low level. Along with this decline was a drop in winter recreational
spending as unseasonably warm weather and rains sharply curbed
skiing and snowmobiling in the eastern half of the district.
Industrial Production and Inventories
Industrial activity was also weak. Directors' comments indicate that
in February and early March manufacturing investment spending and
production continued to expand at January's slow pace. This
sluggishness continues to be attributed to high interest rates and
to uncertainties about consumer and business spending. High interest
rates and economic uncertainties, the Minnesota Department of
Economic Development reports, are keeping many manufacturers from
going ahead with expansion plans. According to a large
Minneapolis/St. Paul manufacturer, these factors are also causing
firms to cut back on their ordering and reduce inventories. Not only
is manufacturing slow, but in February and early March taconite
plants and lumber mills continued to operate well below their
capacity.
Agricultural Conditions
Directors continue to be concerned about agricultural conditions.
Our last Redbook reported that falling prices and drought threatened
the district's good agricultural conditions, and these threats
persist. While Minneapolis grain and soybean prices did not change
appreciably between January and mid-March, South St. Paul's cattle
and hog prices declined about 5 and 8 percent, respectively, during
this period. February and early March did not bring the needed
moisture, so most of the district is currently classified by the
National Weather Service as experiencing moderate to severe drought.
Financial Developments
Reflecting the weaknesses in the district economy was the continued
sluggishness in bank lending. In February and early March, lending
at banks throughout the district remained at January's low level,
and Bank directors report that banks in their areas have plenty of
funds to lend.