August 4, 1993
Moderate growth continues to characterize the economy of the Ninth District in spite of adverse weather and flooding in many areas. Residential and commercial construction continues above 1992 levels and is perhaps the strongest component in the district economy. General merchandise and vehicle sales are also good except in areas where flooding has slowed retail spending. The tourist industry is generally strong in western portions of the district but somewhat slow in regions plagued by persistent rains. Price levels are stable with no indications of inflationary pressures while labor markets show modest improvements in employment levels. However crops, particularly soybeans and corn, have suffered extensive damage from heavy rains, flooding and cool weather, such losses are likely to exceed $1.5 billion.
Construction and Housing
Construction continues to be one of the strongest areas in the
economy. Publicly awarded construction contracts in Minnesota and
the Dakotas continue to run 25 percent above 1992 levels.
Residential construction is also strong throughout most areas of the
district. "Home builders are seeing a steady flow of business this
summer," said one Minneapolis-St. Paul builders association
spokesperson. A substantial new apartment project was announced in
Fargo, N.D. Newspapers also report substantial construction of
housing in the Black Hills region of western South Dakota, new or
expanded tourist facilities in northeastern Minnesota and retail
buildings in Grand Forks, N.D.
Consumer Spending
In June and July, general merchandise sales appear stronger than in
April and May. Shopping mall managers in eastern South and North
Dakota reported traffic up from 1992 levels. A major Minneapolis-
based retailer reported June comparable-store sales up about 4
percent from 1992 levels and stated that they were encouraged with
the performance of their moderate-price division. New vehicles
generally continue as a strong area of consumer spending although
dealers and industry spokespersons in areas affected by flooding
report that sales are down for autos and particularly for pickups.
Tourism
Tourist activity is generally good for the district as a whole.
Industry sources and newspapers from Michigan's Upper Peninsula,
North Dakota and Montana all report a generally good season. Bridge
crossings into the Upper Peninsula are about 5 percent above year-
earlier figures. There is increased bus tour traffic in both North
and South Dakota. The tourist season in Montana had a strong start,
but visits have slowed recently in response to wet weather. In South
Dakota business appears mixed. A Tourism Department official said
visits were down in spite of a 12 percent increase in inquiries
while state park visits are up from 1992. And cool, wet weather has
slowed tourism somewhat in Minnesota and Wisconsin according to
industry and government officials.
Manufacturing and Mining
Manufacturing output appears to have grown slightly. Year-to-date
industrial use of electricity continues above trend. New small
manufacturing ventures were opened or announced in Williston and
Westhope, N.D., Menomonie, Wis., and Duluth, Minn. Most publicly-
traded small and medium manufacturing firms continue to report
improved earnings compared to corresponding periods in 1992.
District advisory council members report that manufacturers are
cautious about capital investments, but are buying new machinery or
upgrading existing facilities to increase output with existing
staff.
Mining employment is stable while output is rising a bit. One western South Dakota gold mine is making a major investment to reach a new ore body. And an iron mining firm with operations in the Lake Superior region reported that its production and sales were higher than 1992 levels and above the firms own earlier projections for the 1993 season.
Prices, Wages and Labor Markets
There is little evidence of upward pressure on price levels.
Gasoline prices are well below year-earlier levels. Lumber prices
have moderated somewhat after sharp increases earlier in the year.
Advisory council members and Ninth District directors report
generally stable prices in their businesses or communities and note
that new public and private sector compensation agreements generally
include limited increases in wages with most increases channeled
into health benefits. Employees of a major airline are likely to
approve an agreement that will significantly cut their compensation
as the firm struggles to avoid bankruptcy.
Non-farm employment is above year-earlier levels in all Ninth District states with most of the increase in services and trade employment. Unemployment rates declined in Montana, North Dakota, South Dakota and the Upper Peninsula of Michigan. No large layoffs were reported.
Agriculture
Excessive rain and flooding has seriously damaged crops,
particularly in eastern South Dakota, southern Minnesota and west
central Wisconsin where corn and soybeans predominate. As much as 10
to 15 percent of planned corn and soybean acres were never planted
due to persistent adverse weather beginning in April. In a special
survey agricultural bankers in these areas expected corn and soybean
yields to be only about 60 percent and small grains to be 75 percent
of normal. Ninety-two of 227 counties in Minnesota, Wisconsin and
South Dakota have already been declared disaster areas. Although
wheat-growing areas had generally favorable conditions through June,
recent heavy rains and flooding in eastern North Dakota have raised
concern about the harvest. Crop development is two to three weeks
behind normal across virtually all of the district due to
unseasonably cool weather. And rains have obstructed hay harvesting
across Wisconsin, pushing hay prices to record levels and squeezing
net incomes in dairying.
But above-normal precipitation has been a boon to cattle raisers; pasture and range conditions in the Dakotas and Montana are reported to be the best in many years. Irrigation reservoir levels in western areas of the district are recovering from declines in preceding drought years. Meat prices, especially for beef, continue to be generally favorable.