October 23, 1985
Ninth District economic growth appears to have steadied, with no indications of significant advancement in its pace. Employment conditions remained stable between July and August. Aside from solid motor vehicle sales, strength has not generally been evident in key components of consumer spending. Manufacturing performance has been spotty. While livestock prices have improved substantially, major crop prices have remained poor. Reflecting the sorry state of Ninth District farmers, agricultural bankers report that their farmer clients' plights haven't eased.
Employment
The most recent unadjusted employment data show stability in overall
employment conditions. During August, unemployment rates continued
to hover around 5 percent in Minnesota and the Dakotas. Employment
remained steady between July and August in Montana and the Upper
Peninsula of Michigan. A Bank director notes that Sioux Falls and
Rapid City, South Dakota, accounted for most of the monthly
employment growth in that state, which is suffering from a slack
rural economy.
Large, divisive strikes in the food processing industry have continued to plague Austin, Minnesota, and Sioux Falls, South Dakota. Other labor developments include the announcement of future layoffs in some iron ore processing plants in northeastern Minnesota and the hiring of nurses (who were in excess supply last year) in Rochester, Minnesota.
Consumer Spending
Retail sales of general merchandise have varied quite a bit. One
large retailer reports that sales in September were less than
expected and speculates that some of its normal September business
may have already come during August. A Bank director notes that
while sales slowed at some Sioux Falls, South Dakota, retail
facilities, sales picked up again in October. Another director notes
the continuing lackluster performance of small agriculturally
dependent Main Street retailers. However, another large retailer had
good September sales—better than expected. Among retail goods,
home-related products have been selling particularly well. Credit
sales appear to be much stronger than cash sales, causing some
concern about speed of payback.
District sales of motor vehicles continued strong throughout September. Two domestic manufacturers have only a handful of 1985 models left. Year-to-date car and truck sales continue to surpass year-earlier levels. Inventories of 1986 vehicles are at extremely low levels, however, causing problems for dealers.
Housing activity wasn't bad in the Minneapolis-St. Paul area, but was spotty elsewhere. Sales in both Minneapolis and St. Paul were higher this September than last. Residential building contracts in Minnesota were 14 percent higher this August. And while home miles have slowed in Sioux Falls, South Dakota, a recent housing bond issue will finance the construction of about 24 apartments in Rapid City, South Dakota, A Bank director notes that sales at existing homes have also been slow in Rochester, Minnesota.
Manufacturing
Manufacturing performance has been mixed. Among major high tech
firms, Sperry Corporation laid off 70 workers at its computer plant
in suburban St. Paul. Control Data Corporation announced further
austerity moves. including some mandatory unpaid vacation days. And
3M Company announced that it plans to temporarily shut down its
industrial and medical supplies plant in Aberdeen, South Dakota, one
day per week. Bank directors note that pulp and paper operations in
northern Minnesota and the Upper Peninsula of Michigan are slowing
from their full-capacity output earlier this year. But building
material manufacturers report that business is good, and two new
plants are expected to open in South Dakota: a plant to manufacture
equipment for the transportation industry in Watertown and a meat
packing plant in Pine Ridge.
Agriculture
Two bright spots on the dark agricultural horizon have been the
drastic improvement In livestock prices and Taiwan's agreement to
buy $14 million in wheat from South Dakota, Montana, and Minnesota
wheat farmers. A Bank director is relieved to report that cattle
prices in parts of Montana rose about 15 percent during the last
month. But major crop prices have remained low. Prices received in
Minnesota for corn and soybeans continued to sink further, with
soybean prices in August hitting their lowest level since March
1976.
Bank directors note that crop harvesting is being hindered by wet, cold conditions in parts of North Dakota and throughout Minnesota. Some windy, dry weather is needed to ensure a good harvest.
Finance
This district's survey of agricultural bankers at the end of the
third quarter reflects the continuing farm crisis. The median
respondent banker estimates that 3 percent of her or his farmer
clients went out of business in the past six months. Demand for
refinancing farm loans remained high, while the rate of debt
repayment remained low.