June 21, 1995
The Ninth District economy shows few signs of slackening from the brisk pace reported previously. Manufacturing is strong. Oil drilling is experiencing a resurgence, mines are looking for ways to expand output and paper mills are running full out. The construction sector as a whole is robust, with commercial and heavy building projects more than offsetting declines in residential work. General merchandise sales are improved from earlier in the year. Vehicle sales remain below year-earlier levels, but some sources note an upturn in sales. Employment growth remains robust and employers report continuing problems in finding employees. Few substantial wage or price increases are reported other than for paper products and some industrial inputs.
Adverse weather is responsible for problems in two sectors. Excess rainfall and cool weather severely delayed planting in many areas. Some loss of potential yield appears likely, particularly in the Dakotas. Moreover, the same wet, cool weather has dampened business in most tourist regions.
Manufacturing
"We are as busy as we ever have been," says one Minneapolis small
manufacturer, "and so is everyone else that I talk to." That
statement generally characterizes conditions for manufacturers
across the district, and is especially true for Minneapolis-St.
Paul, Minn., Fargo, N.D., and Sioux Falls, S.D. Orders remain strong
and the most pressing problem for many firms is securing skilled
employees.
Natural resource industries
Energy and the other non-agricultural natural resource sectors are
very strong. New drilling technology and a recently discovered oil
formation have caused an upswing in drilling in North Dakota.
Leasing, exploration and drilling activities in that state are at
their highest levels in a decade. Gas and oil drilling is also
strong in Montana. The non-ferrous metal mining sector continues to
respond to strong prices by producing at capacity. An open-pit gold
mine in South Dakota proposed doubling in size, while a new copper
refinery is being constructed adjacent to a mine in Michigan's Upper
Peninsula. Iron mines round Lake Superior continue to expect 1995
shipments to be the strongest in several years.
Favorable prices have paper mills running at capacity and looking for ways to eliminate bottlenecks. Lumber prices are down in response to slowing of residential construction for the nation as a whole, but loggers remain busy. Plants producing oriented-strand board and other plywood substitutes are also busy.
Construction and real estate
"The construction industry will continue strong, although the boom
in residential and commercial construction will be replaced by
industrial and public works projects," says a Montana business
forecaster. That aptly summarizes the construction sector for the
Ninth District as a whole. There is some slackening of residential
work from the effervescent levels reached a year ago, but non-
residential projects are so strong that overall activity is up
slightly. In Minnesota, for example, total construction employment
in April was up 1 percent over year-earlier levels in spite of a 25
percent decline in single-family permits over the same period. For
the Minneapolis-St Paul metropolitan area, the employment increase
in the same period was nearly 9 percent as increased commercial work
more than compensates for the drop in home building. Moreover, in
early June, one builders association representative reported that
declining mortgage interest rates are causing increased interest in
home building. Large, publicly let projects in Minnesota and the
Dakotas for the year through April are even with 1994 and well above
levels of the previous three years.
Agriculture
Persistent rain, flooding and excessive soil moisture are widespread
problems for crop producers. Spring planting was delayed by two
weeks or more for all major crops in all district states except
Montana. Large areas of eastern North Dakota and South Dakota are
still unplanted. While weather conditions improved in early June,
planting delays were so severe and so widespread that some yield
loss can be expected. For example, as of June 4, only 55 percent of
South Dakota's corn was planted compared to a five-year average of
91 percent. The growing season in this region is such that corn
planted after the first week in June is usually ensiled as cattle
forage, but seldom produces marketable grain. In the livestock
sector, hog and cattle numbers remain high and prices low.
Consumer spending and tourism
"Our retail sales continue to be very strong," reports the CEO of a
firm with department stores across the Ninth District. Across the
region, sales of general merchandise apparently have improved since
the preceding report. Some mall managers describe a recent pickup in
traffic after a slump earlier in the year, and national chains based
in Minneapolis report improved sales.
Vehicle sales continue somewhat below levels that prevailed a year ago. In North Dakota, South Dakota and Minnesota new registrations for the year through May are about 10 percent below year-earlier levels. But there may be some upturn. While South Dakota's year-to- date totals continue to lag 1994, new registrations for the month of May were up 11 percent from year-earlier levels. Some dealers and association representatives confirm some strengthening of sales, particularly for pickups and sport-utility vehicles.
A cold, wet spring has dampened tourism in many parts of the Ninth District Tourism in the Upper Peninsula of Michigan decreased during May from a year ago due to poor weather and the Canadian exchange rate, according to tourist officials. In South Dakota, visitations to major outdoor attractions dropped about 10 percent. On a brighter note, an official in Duluth, Minn., reports a 7 percent increase for May.
Employment wages and prices
"State economy still churning out new jobs," was a headline in a
recent Montana newspaper that could be used to characterize the
Ninth District as a whole. Employment levels are generally 2.5
percent to 3 percent above a year ago. Unemployment rates in most
important labor market areas range from less than 2 percent to 4.5
percent Many firms continue to report difficulty in securing both
skilled and entry level workers.
With respect to wages and prices, reports are mixed. Paper products continue to increase in price, and there are reports of magazine publishers switching to cheaper grades. Some manufacturers report increases in prices for steel and plastic components. But a builders association noted that building materials prices, especially lumber, have dropped dramatically. Reports on wage trends are mixed. Many employers report they have raised entry-level wages substantially in order to secure needed workers. But others report new wage agreements with increases of 2 percent to 3 percent.