September 11, 2002
The Ninth District economy appears to have grown very little from mid-July through August. Agriculture, residential construction and tourism grew. Output was flat, however, in the energy and mining sectors, consumer spending was level, and commercial construction and manufacturing contracted. Over this period, labor markets were mixed, while wages and prices were stable. Significant price increases were noted in insurance and housing.
Construction and Real Estate
Commercial construction was soft. A commercial real estate firm
noted that office vacancy rates in Minneapolis-St. Paul have
recently increased to 16 percent, not including sublease space.
The value of contracts awarded for new construction projects
in Minnesota and the Dakotas was higher for roads and bridges,
but lower for public and private buildings for the three-month
period ending in July compared with last year.
In contrast, home building and real estate activity were solid. District housing units authorized were up 8 percent for the three-month period ending in July compared with a year ago. More home sales were closed in the Minneapolis-St. Paul area in July than in any month during the past five years. Home builders in Grand Forks, N.D., were busier than last year, according to a contractor. However, Minneapolis-St. Paul apartment vacancy rates were twice as high as last year. Furthermore, recent home foreclosures were above last year's levels in the Minneapolis-St. Paul area.
Consumer Spending and Tourism
Overall consumer spending was level with noted increases in
car sales and weak other retail sales. A major Minneapolis-based
department store retailer reported that overall same-store sales
were below plan for the first two weeks of August. A Minnesota-based
electronics retailer reported flat sales in July compared with
a year ago. Meanwhile, a Helena Branch director reported recent
soft retail sales in northwestern Montana.
Mall managers reported that sales were generally weak. In the St. Paul-Minneapolis area two mall managers reported that recent sales were flat to slightly higher than last year. Retail sales were down slightly in July from last year at a North Dakota mall; however, foot traffic in August was strong. A Montana mall manager reported flat sales in July compared with a year ago. However, same-store sales at a South Dakota mall were up 5 percent in July, and were up about 3 percent to 5 percent in August from last year, according to a mall manager.
A Montana car dealer reported record sales for the month of July—15 percent higher than last year. Recent car sales were robust at dealerships in South Dakota, according to an auto dealers association representative.
Summer tourism activity was strong. July and August tourism activity was up 3 percent to 5 percent compared with a year ago in the Duluth, Minn., area due to active convention business and leisure travel. In northwestern Wisconsin, recent visitor numbers and resort bookings were higher than a year ago. Visits to Mt. Rushmore and state parks in South Dakota were up 8 percent and 5 percent, respectively, in July compared with a year ago. A tourism official in Montana predicted a 1 percent to 2 percent increase for 2002 in nonresident travelers compared with last year. Visits to Yellowstone and Glacier National parks were up from last summer.
Manufacturing
Manufacturing activity was down. An August survey of purchasing
managers by Creighton University (Omaha, Neb.) indicated decreased
manufacturing activity in Minnesota and North Dakota and increased
activity in South Dakota. In Minnesota, a maker of electrical
contractor tools announced it will close a manufacturing facility,
and a water filtration producer will close a factory by the
end of the year. In northwestern Wisconsin, a furniture manufacturer
recently abandoned expansion plans, while a veneer plant is
currently ramping up production and a new saw mill opened. In
South Dakota, a food processor is building a $40 million cheese
plant, which is one of the largest one-time private investments
in state history.
Energy and Mining
Activity in the energy and mining sectors was unchanged. Mid-August
district oil and natural gas exploration and production levels
were about even with early July. Meanwhile, August production
at a large iron ore mine was about equal with July, according
to a company spokesperson. Late August Montana mining output
was unchanged from early July, and miners are cautiously optimistic
about the future, according to a Montana mining industry spokesperson.
Agriculture
The overall agricultural economy was up, primarily due to stronger
crop prices. Late August corn, soybean and wheat futures prices
were up 11 percent, 8 percent and 10 percent, respectively,
from early July. The U.S. Department of Agriculture (USDA) reported
diverse estimates for corn, soybean and small grain output in
district states. Minnesota's 2002 corn and soybean crops are
anticipated to increase 18 percent and 4 percent from 2001,
respectively, while South Dakota's 2002 corn and soybean crops
are forecast to decrease 5 percent and 13 percent, respectively.
North Dakota oat production is predicted to increase 33 percent
in 2002 from 2001. The total Montana 2002 wheat harvest is expected
to increase 45 percent over 2001's drought-ravaged crop. However,
the drought has moved into South Dakota, causing hay production
to be down an estimated 46 percent from last year. The USDA
recently announced a feed assistance program to help South Dakota
cow-calf operators.
Employment, Wages, and Prices
Labor markets were about the same as the previous report with
a mix of layoff and expansion announcements. A Minnesota company
that installs and services telecommunications systems announced
plans to lay off 100 workers. A North Dakota agricultural machine
manufacturer recently cut 22 employees. A state agency in Minnesota
is cutting over 100 jobs. According to a poll by a staffing
company, 23 percent of respondents in Minneapolis-St. Paul plan
to expand payrolls during the final quarter of 2002, while 11
percent expect to decrease staffing levels -- similar to the
same survey taken a year earlier. Recent job vacancies were
down 24 percent in the La Crosse, Wis., area from a year ago,
according to a Wisconsin study. A state survey revealed that
second quarter job vacancies in Minnesota were down 41 percent
from a year ago. However, almost 7 percent of nursing jobs in
Minnesota were vacant.
Meanwhile, a call center in the Upper Peninsula of Michigan is expected to hire 60 more people. In North Dakota a children's play equipment producer recently announced plans to add 100 new jobs.
Wage increases were moderate. More than half of business leaders in central Minnesota who responded to a recent survey conducted by the St. Cloud (Minn.) Area Quarterly Business Report expect wages and compensation to remain level through the end of the year. Wages for field workers in a region that includes Minnesota and Wisconsin were down 5 percent in July compared with last year.
Price increases were also moderate, with significant increases noted in health insurance and home prices. A bank director noted slight increases in overall prices, but significantly increased health insurance costs compared with last year. The median home sale price in the St. Paul-Minneapolis area was up 8.6 percent in July over a year ago.