September 16, 1984
Moderate economic growth continues in the Ninth District. Seasonal improvement in the labor market continues unabated. Modest consumer spending gains are reported by most sectors. While residential construction appears to have fallen off, nonresidential construction doesn't appear to have done so. Performance in the financial, agricultural, and resource-related sectors remains unchanged from our last report.
Employment
The most recent data show stability in the labor market.
Unemployment rates in Ninth District states continued to seasonally
improve in July, led by South Dakota's precipitous drop to 3.8
percent. While Minnesota's unemployment rate rose somewhat, analysts
attribute most of the increase to statistical anomalies. Ninth
District unemployment fell by close to 14,000 workers between June
and July. Continuing stability is indicated by the increase in the
Minneapolis help-wanted advertising index, which rose in July to a
level 10 percent higher than a year earlier.
Consumer Spending
General merchandise sellers report modest gains in August. One large
retailer says its August volume was slightly below expectations
because of a slightly disappointing back-to-school promotion.
another large retailer thinks that some cool August weather
depressed its air conditioner sales. Both of these retailers
recorded an 8 percent nominal sales gain over August 1983. Reports
from around the district are mixed, with modest gains in diversified
cities and no gains in agriculturally dependent smaller towns.
By mid-August, motor vehicle sales fell off a bit from their performance earlier this year. Sales were still more than 12 percent ahead of August 1983, though. One domestic manufacturer reports particularly good gains in its truck line. While a recently established car dealership reports that business has been good, it is worried about problems created by low inventories if auto workers strike. This Bank's directors from around the district feel that, while the pace of new car sales may have fallen off a bit in August, it was still good.
Home sales also appeared to fall off in August. A spokesperson for realtors says that August bookings in the Twin Cities seem to have been slower than in past years. Another analyst says that Minnesota housing market activity probably peaked in June. Condominium resales have been slow in the face of many multi-family starts.
Tourist spending, while not as high as expected, hasn't been bad lately. The weather could have been better in the Upper Peninsula of Michigan, where rain hurt its Labor Day weekend business. One Bank director reports that early school openings hurt resort business in parts of Wisconsin. The number of visitors to national parks in Montana this summer was from 5 to 10 percent lower than last summer, in part due to the low value of the U.S./Canadian exchange rate.
Nonresidential Construction
Industrial, office, and special construction projects continued
despite higher interest rates. One developer in the Twin Cities
reports that advance leasing of its projects in that area has been
going well. Sizable demand is also indicated by declines the Twin
Cities office and industrial vacancy rates. But some softening of
this type of construction activity may be on the horizon, due to the
congressional cap on industrial revenue bonds and recent changes in
the federal tax code.
Finance
Between mid-July and mid-August, deposits grew slower and loans grew
faster at large Ninth District commercial banks than at large banks
in the nation as a whole. Commercial and industrial loans were
especially strong at the district's large banks. Outside the Twin
Cities, Bank directors report fairly flat deposit and loan growth.
Agriculture
Agricultural conditions haven't changed much from those reported
earlier this summer. Crop conditions are generally good outside the
excessively dry areas of the western Dakotas and northeastern
Montana. For example, exceptional oat yields are reported in parts
of Wisconsin. Furthermore, cattle prices are firming, and the dairy
diversion program is cutting milk production. Bat low prices and
high debt service continue to plague many farmers. A recent survey
of Minnesota farmers found that 13 percent had high debt-to-asset
ratios, in excess of 70 percent.
Resources
Bank directors report a mixed picture in resource-related
production. Lumber in still suffering from low prices, although
plywood prices have firmed a bit. But pulp demand is still strong.
Coal production in North Dakota and Montana hasn't increased much.
But oil and gas profits are helping to spur the economy of western
North Dakota and northeastern Montana. Furthermore, Lake Superior
ore shipments are greater than they were a year ago.