October 15, 2003
Overall Ninth District economic activity increased in late August and September. Residential real estate, manufacturing, agriculture, consumer spending and mining grew. Meanwhile, tourism was mixed, and commercial real estate and energy were down slightly. Labor markets were soft. Wage and price increases were generally moderate; however, significant price increases were noted in natural gas, freight and health insurance, with decreases in gasoline.
Construction and Real Estate
Commercial real estate activity was down. According to a local
business magazine, landlords of commercial property in the Minneapolis-St.
Paul area have recently offered generous incentives to prospective
tenants, such as payment for improvements, free furniture and
discounted monthly rent. In addition, contracts awarded for large
building projects in Minnesota and the Dakotas were down 3 percent
for the three-month period ending in August compared with the
same period a year ago.
Home building and residential real estate activity grew. Housing units authorized in the Minneapolis-St. Paul area were up 15 percent in September compared with last year. The number of closed home sales in the Minneapolis-St. Paul area was 25 percent higher in August compared with a year ago, while the median home sale price increased 9 percent. A Montana bank director reported that real estate sales and prices have been up steadily in the Bozeman area, with no immediate signs of a slowdown. Another bank director noted that refinancing activity dropped significantly during early September in southwestern Wisconsin, but signs of recovery were seen by the end of the month.
Consumer Spending and Tourism
Overall retail sales grew modestly. A major Minneapolis-based
department store and discount retailer reported same-store sales
in August up 5.7 percent compared with a year ago. A representative
of a nationwide retailer noted strong back-to-school sales at
stores in North Dakota. Storeowners in southwestern Montana reported
solid back-to-school sales activity. Two mall managers in North
Dakota reported recent sales about at last year's strong levels.
In southwestern Wisconsin, recent sales for men's and women's
apparel were soft, but jewelry sales were up from a year ago.
A representative of a Minnesota-based women's apparel retailer
expected September same-store sales to finish flat to up slightly.
Some store managers noted that federal tax rebate checks sent
to taxpayers with children may have helped strengthen sales. In
contrast, high-end stores in two Minneapolis-area malls reported
recent sales behind last year's.
Auto sales were slower in September compared with July and August. Showroom traffic was slow in September, and truck orders were down in rural areas, according to an auto dealers association representative in Minnesota.
Tourism activity was mixed. Visits to Glacier National Park were down significantly due to fires, while August visits to Yellowstone National Park increased compared with July. A bank director reported strong bookings for fall conferences and the ski season at hotels in the Bozeman, Montana, area. Tourism conditions were mixed among attractions in Minnesota, according to a tourism official; summer tourism picked up in August relative to a slow start earlier in the summer. In South Dakota visits to Mount Rushmore increased about 5 percent in August compared with a year ago.
Manufacturing
Manufacturing activity was up slightly. A September survey of
purchasing managers by Creighton University (Omaha, Nebraska)
indicated overall increased manufacturing activity in the Dakotas
and Minnesota. As evidence, a South Dakota video display producer
had the busiest fall season in the history of the company. A Minnesota
manufacturer of snowmobiles and ATVs plans to build a large research
and development site in the district. Advisory Council on Small
Business and Labor members reported generally increased manufacturing
production and orders. However, a large meat company announced
plans to close a processing plant in Minnesota.
Energy and Mining
Activity in the energy sector decreased slightly, and the mining
sector increased. September district oil and natural gas exploration
levels decreased slightly from mid-August. However, most major
district operating iron ore mines are producing at near capacity.
Metal prices firmed up, and several Montana mines plan to renew
or upgrade operations. "The future is looking better every day,"
commented a Montana mining official.
Agriculture
Agricultural economic conditions improved in September from August.
The U.S. Department of Agriculture reported higher prices, as
Wisconsin farmers and ranchers were expected to receive 4 percent
more for milk and 6 percent more for beef cattle in September
compared with August. The district experienced a large harvest
of small grains, and winter wheat plantings have started. The
USDA reported big increases in wheat and oat yields, and production
in 2003 compared with 2002 for most district states. For example,
North Dakota's wheat production increased 46 percent from 2002
to 317 million bushels. Due to drought, which was eased somewhat
by September rains, row crop harvests started early this year.
The USDA reported mixed conditions for Minnesota's row crops,
as 30 percent of corn and 24 percent of soybeans were rated good,
while 29 percent and 33 percent, respectively, were rated poor
or very poor.
Employment, Wages and Prices
Labor markets were soft with some layoffs reported. In South Dakota
a computer manufacturer will lay off 650 workers by the end of
the year. In Minnesota, a computer-storage product manufacturer
recently cut about 150 jobs companywide, while a telecommunications
equipment and services company recently laid off 100 employees.
Also in Minnesota, a software company just announced plans to
cut 80 jobs, and an office product manufacturer laid off 55 workers.
In contrast, a mine opening in Montana will likely create 400 jobs by year end. A temporary staffing agency survey showed that 32 percent of employers in Minneapolis-St. Paul expect to hire more workers during the fourth quarter and 13 percent expect to reduce payrolls. Last year 23 percent expected to increase payrolls; 11 percent planned reductions. Initial claims for unemployment insurance in Minnesota decreased 8 percent in August compared with a year ago.
Increases in wages and salaries were moderate. For example, a teachers union in Minnesota recently agreed to an average salary increase of 2.5 percent the first year and 1.2 percent the second year of a two-year contract.
Price increases were generally moderate, with significant increases noted in health insurance, natural gas and freight, while gasoline prices were down. Several members of the Advisory Council on Small Business and Labor mentioned that overall price increases were minimal, while health insurance rates increased well over 10 percent in 2003, compared with last year. Natural gas prices were recently 15 percent above last year's levels; double-digit increases on fuel bills are expected this winter. An owner of a trucking company in Montana reported that recent freight rates were notably higher than a year ago. Gasoline prices in Minnesota decreased 21 cents from mid-September to the end of the month.