December 8, 1993
While still moderate, the pace of growth in the Ninth Federal Reserve District appears to have picked up somewhat in late fall. Holiday sales are off to a strong start, following improved fall retail sales. Residential construction remains strong throughout the district, and other construction is also expanding. District manufacturing appears to be improving as well, and recent increases in gold prices are boosting metal mining. Moreover, district employers are hiring, and wages are stable with district business leaders expecting smaller price increases than they did a year ago. Crop production is down in the eastern portion of the district and up in the western portion; the situation is reversed for forest products, production is up in the eastern portion, but down in the west due to limited timber supplies.
Consumer Spending
Holiday sales are off to a strong start, following improved fall
retail sales. On the Friday after Thanksgiving, major Minneapolis/St
Paul retailers reported the highest customer traffic in recent
years, and many district retailers anticipate good holiday business.
Moreover, sales had been strengthening prior to Thanksgiving
weekend. At two large Minneapolis/St Paul shopping malls, sales had
improved this fall, and a large Twin Cities retailer reported strong
business in October and early November. A Minnesota retailer with
stores outside the Twin Cities, however, reported weak fall sales.
Meanwhile, in western South Dakota retail sales lately have been up
3 percent to 5 percent from a year ago, and at a North Dakota mall
October sales were up 8 percent from last year. In west central
Wisconsin large retailers' fall sales were running 4 percent to 6
percent ahead of a year ago.
Motor vehicle sales are also increasing. In North and South Dakota year-to-date new automobile and light truck registrations are up around 15 percent and 18 percent, respectively, from a year ago. In Minnesota they are up slightly.
Construction and Housing
Besides buying merchandise and autos, consumers are purchasing
homes, as residential construction remains one of the district's
strongest sectors. Western Montana builders have enough work to keep
them busy through the end of 1994, states an advisory council
member, and directors and other advisory council members have
similar reports from west-central Wisconsin, eastern North Dakota,
South Dakota and other areas of Montana. In Minneapolis/St. Paul,
building permits for housing were up about 15 percent in October
from a year earlier.
Other building is also expanding. In Minnesota and the Dakotas, the volume of construction contact awards, excluding residential, amounted to approximately $3.2 billion during the first 10 months of 1993, a 9 percent increase from a year earlier. In Grand Forks, M.D., 60 construction projects are under way and Fargo, N.D., has even more construction projects. Meanwhile, in Eau Claire, Wis., businesses are acquiring spec buildings before they are completed.
Manufacturing
Across the district, manufacturing appears to be improving as well.
In west central Wisconsin manufacturing is very strong says an
advisory council member. In Minneapolis/St. Paul a large national
manufacturer reports production is above last year and above
projections for this year. In Duluth, Minn., an electronics firm
plans expansion. In North Dakota construction equipment, food
products, wood products and furniture manufacturers all report
rising sales. In Rapid City, S.D., a denim clothing factory is
opening.
Plant closings, however, persist. In Duluth, Minn., a 75.year-old tool and horseshoe factory is closing, and in St. Paul. Minn., a snack food plant, employing 288, is also closing.
Metal Mining and Forestry
Recent changes in metal prices are helping some district metal
producers and hindering others. Increases in gold prices an spurring
mining in South Dakota and Montana. Low aluminum prices and
increased electricity prices could curb aluminum production in
western Montana.
In the eastern portion of the district, forest products production is expanding, but declining in the west. In Montana and South Dakota timber cutting continues substantially below past-year levels. But in west central Wisconsin, output in the pulp industry is described as stable and hardwood production in these areas is reportedly very strong. Production of wood-based plywood and lumber substitutes continues strong in Minnesota, Wisconsin and Michigan, reflecting the healthy construction sector.
Employment, prices and wages
District employers are hiring but having some difficulty getting
workers. A Minneapolis/St. Paul airline recently rehired 315 flight
attendants and 240 mechanics. Many west central Wisconsin employers
are making small additions to their work forces, and in western
Montana and South Dakota labor markets are tight. "It's virtually
impossible in Grand Forks to find construction workers," says a
North Dakota advisory council member, but ample workers are still
available for minimum wage jobs. Recently, there were 225 applicants
in eastern North Dakota for 16 jobs paying $4.50 a hour.
Despite the tightening in labor markets, directors and advisory council members report little change in wages.
Consistent with stable wages, district business leaders foresee smaller price increases than they did a year ago. In a recent Minneapolis Fed poll, 54 percent of respondents expect prices over the next year to increase 3 percent or less, compared to 27 percent who gave that response a year ago. In the current poll, 41 percent expect a 4 percent increase in prices and only 5 percent foresee a greater than 4 percent increase; comparable numbers a year ago were 48 percent and 25 percent.
Agriculture
As the 1993 crop season ended, final yield data for major crops
varied greatly. In the eastern portion of the district, corn and
soybean production were sharply down from normal levels and wheat
was down somewhat. But wheat was up in the west.
Livestock output is essentially stable. Cattle slaughter continues slightly above and hog slaughter slightly below year-earlier levels. Prices remain favorable for both cattle and hog producers, and bankers report that livestock income is helping to stabilize farm finances in areas with poor crops.
While farm incomes are good in Montana as a result of favorable production conditions and prices for wheat and cattle, they are generally down throughout much of the rest of the district. Reflecting this variation, farm spending on new machinery or facilities is reportedly good in Montana and western areas of North Dakota, but slack in most other areas, according to reports by advisory council members and in newspapers. Montana crop land prices rose about 8 percent, while pasture and range land prices reportedly rose about 10 percent, reflecting strong feeder cattle prices.