April 15, 2015
The Ninth District economy grew moderately overall since the previous report. Increased activity was noted in consumer spending, commercial and residential construction and real estate, and professional services. Activity was flat in manufacturing and tourism, while activity decreased in energy and mining and in agriculture. Labor markets were mixed, as a number of layoffs were noted since the previous report. Overall wage increases were moderate, and prices generally remained level.
Consumer Spending and Tourism
Consumer spending increased moderately. In Minnesota, a mall reported sales up 10 percent in February compared with a year earlier, while another mall noted that sales during the first quarter were level with a year ago and that traffic was up slightly. Sales and traffic during the first quarter were ahead of last year at a mall in Montana. A retailer in Minnesota expects same-store sales to grow 2 percent during the three-month period ended in April compared with a year ago. An auto dealer in Minnesota reported that car and truck sales during the first three months of 2015 were slightly ahead of a year ago.
Tourism activity was flat. Warm weather and lack of snow brought an early end to winter tourism activity in several areas of the District. However, a ski resort in Montana reported good snow conditions with lodging on par with a year ago and skier visits slightly behind last year. A tourism official in western South Dakota noted that warmer weather has boosted visits to National Park areas and that summer bookings for hotels were up compared with a year ago.
Construction and Real Estate
Commercial construction activity increased. Plans for a new 36-story commercial building in downtown Minneapolis were announced. North Dakota enacted a "surge" law, which adds $1.1 billion in infrastructure construction to the energy-producing region of the state. In Sioux Falls, S.D., the value of February commercial permits increased from a year ago. In Billings, Mont., commercial permits increased in value in March from a year earlier. On balance, residential construction activity in the District was up compared with a year ago. In the Minneapolis-St. Paul area, the value of March residential permits increased 39 percent compared with March 2014. March single-family residential building permits in Billings decreased in value from the previous year, but multifamily values increased. The value of February residential permits in Sioux Falls decreased from a year earlier.
Activity in commercial real estate markets increased since the previous report. An industrial real estate market specialist said that the Sioux Falls industrial market is "incredibly tight." A large health care company is securing more office space in North Dakota. An increased number of commercial real estate transactions were announced since the last report in many areas of the District. Residential real estate activity increased. In the Sioux Falls area, February home sales were up 6 percent, inventory increased 8 percent, and the median sales price increased 12 percent relative to a year earlier. Western Wisconsin home sales increased 7 percent in February from a year earlier, and the median sales price rose 6 percent. Minnesota home sales were down 1 percent in February from a year earlier, the inventory of homes for sale increased 4 percent, and the median sales price rose 13 percent.
Services
Activity at professional business services firms increased since the previous report. A large web development company noted that recent overall activity was up, but the type of work has changed to more mobile platforms. An architect noted increased requests for proposals.
Manufacturing
District manufacturing activity was flat overall compared with the previous report. Indexes of manufacturing activity released by Creighton University (Omaha, Neb.) covering Minnesota and South Dakota decreased in March from the previous month to levels indicating neutral growth, but the index for North Dakota increased slightly and showed positive growth. A small motorcycle producer announced that it will close a South Dakota plant. Several manufacturers of truck trailers in the District are expecting sales growth of 10 percent or more in 2015. A North Dakota firm announced a partnership to produce unmanned aerial systems and components.
Energy and Mining
The energy sector slowdown continued since the previous report. Oil and gas exploration fell further in response to lower oil prices; the number of active drilling rigs in North Dakota and Montana fell to its lowest point in five years in March. However, a company announced plans to build a new $600 million pipeline for Bakken crude. Mining activity also slowed. Three iron ore facilities in Minnesota idled or reduced production in response to lower demand from steelmakers.
Agriculture
District agricultural conditions were weak overall going into the planting season. Crop farmers continue to feel the effects of lower prices, while conditions were better for livestock producers. Milk prices have fallen dramatically in recent months, but dairy producers were still benefitting from lower feed costs. Minnesota turkey producers were concerned about an outbreak of an extremely virulent strain of flu that has killed thousands of birds; the state is the nation's largest producer of turkeys. Prices received by farmers in February fell from a year earlier for corn, soybeans, wheat, hay, milk, chickens, and hogs; prices increased for cattle, turkeys, and eggs.
Employment, Wages, and Prices
Labor markets were mixed, as a number of layoffs were noted since the previous report. In Minnesota, a retailer announced 1,700 layoffs and the aforementioned iron ore plants will lay off more than 1,100 workers as operations idle. In South Dakota, a manufacturer of agricultural equipment announced over 100 layoffs, while in North Dakota, a manufacturer of agricultural and construction equipment announced plans to lay off 80 workers. In the energy-producing areas of the District, oilfield workers were laid off with the decrease in drilling. Despite layoff announcements, several businesses continued to report difficulty filling open positions. Several businesses in western Minnesota reported difficulty finding qualified workers. A distribution center in Minnesota plans to hire 400 workers. Despite the slowdown in drilling, job openings in the energy-producing area of North Dakota increased slightly in February from January as businesses in several sectors continued to look for employees.
Overall wage increases were moderate. Business contacts generally reported wage gains of 2 percent to 3 percent; however, there were a few reports of companies increasing their starting wage level. Strong wage increases observed in the District's energy-producing region during the past few years have slowed in recent months and in some cases decreased.
Prices generally remained level. Minnesota gasoline prices were up slightly since the last report, but more than a dollar per gallon lower than a year ago. Iron ore prices decreased since the last report, while copper prices increased somewhat.