From mid-April through early June the economy in the Ninth District grew steadily. Growth was noted in real estate, construction, manufacturing, agriculture, mining, energy and consumer spending. District employment relative to last year picked up considerably, while wage increases were moderate. Some signs of price acceleration were noted, including significant increases in tuition, and in a number of commodities and manufacturing and construction inputs.
Construction and Real Estate
Commercial construction activity heading into summer showed some signs of recovery. Most builders surveyed claimed they were seeing steady to increasing business since last year; however, one contractor in western South Dakota reported reduced activity. Several builders cautioned that while the value of business was up, much of it could be attributed to price increases in building materials and fuel. In contrast, the value of contracts awarded for large construction projects in Minnesota and the Dakotas decreased 6 percent for the three-month period ending in April compared with a year ago.
Homebuilding and residential real estate activity were solid. Housing units authorized in District states increased 6 percent for the three-month period ending in April compared with a year ago. The number of signed purchase agreements in the Minneapolis-St. Paul area increased almost 12 percent in April compared with last year. A representative of a realtors association in Minneapolis-St. Paul said that homebuying activity was strong, as well as growth in the number of listings.
Consumer Spending and Tourism
Retail sales grew moderately. A major Minneapolis-based retailer reported that same-store sales during May were up about 5 percent compared with a year ago. A North Dakota mall manager reported that sales were up 6 percent in April and 2 percent each of the first two weeks in May. In the Minneapolis area, a mall manager noted that April was a strong month in both traffic and sales, but May traffic was down slightly from last year. May sales were up 1 percent at another mall in the Minneapolis area, but increases were larger earlier in the year; recent summer apparel sales were slow due to the cool weather.
A representative of an auto dealers association in Minnesota said that sales in May were strong compared with a year ago. In addition, high gasoline prices were not impeding sales of SUVs. In South Dakota, a representative of an auto dealers association reported strong sales in April compared with a month earlier.
Tourism activity was somewhat slowed during Memorial Day weekend due to cool and rainy weather; however, prospects for summer were optimistic. In northwestern Wisconsin, a chamber of commerce official said that retailers that rely on warm weather have seen declining sales, but restaurant traffic was up. According to a survey conducted by the Minnesota Office of Tourism, only a few business owners expect decreases in activity due to higher gas prices, and others noticed that travelers were tending to stay closer to home. Over 45 percent of respondents expect higher revenue during the summer months; 23 percent expect decreases. A tourism official in Montana said that summer reservations were in line with last year's numbers--which were strong compared with previous years.
Manufacturing activity increased. A May survey of purchasing managers by Creighton University (Omaha, Neb.) indicated strong growth in manufacturing activity in the Dakotas and Minnesota. Intentions to build several meat processing plants were announced for Minnesota and South Dakota. A maker of watercraft plans to build a plant in Minnesota. An Advisory Council member who owns a manufacturing facility in the Upper Peninsula reported strong sales growth.
Energy and Mining
Activity in the energy and mining sectors remained robust. Late May District oil and natural gas exploration and production amounts increased slightly from mid-April levels. Meanwhile, prices for most major District mining commodities remained strong. District iron ore mines continued to produce at capacity, and the shipping season is in full swing with Great Lakes water levels and traffic flow up from the low volumes of 2003. The operating mines in Montana produced at near capacity, and some mine workers received profit-sharing checks for the first time in nearly five years.
Agricultural conditions were positive. Prices remained robust for most District agricultural commodities. The U.S. Department of Agriculture reported that May prices for livestock, hogs, and broilers increased from April. The USDA expected May milk prices in Wisconsin to increase to a record $21.50 per hundred pounds. Meanwhile, corn and soybean prices dropped slightly but remained at high levels. Crop progress was ahead of last year and the five-year average for most District crops. Spring rainfall was bountiful across much of the District and relieved drought conditions; however, too much rain saturated some fields and may require some replanting in the eastern portions of the District. Continued drought dried up hopes in the western part of Montana.
Employment, Wages, and Prices
Hiring activity increased since the last report. Nonfarm employment in District states increased 1.3 percent in April compared with the same month a year ago, the largest year-over-year increase since January 2001. Recent announcements to increase employment levels were also noted. A new turkey processing plant planned for South Dakota could employ as many as 1,000 workers. In Minnesota, a defense contractor plans to add 200 jobs, and a credit card processor will expand, adding 50 employees. A new power plant in the Upper Peninsula is expected to create 26 new jobs. Representatives of technology industries in the Minneapolis-St. Paul area recently indicated that revenue and hiring plans were rising somewhat. A Montana bank director commented that quality unskilled workers were in short supply. Initial claims for unemployment insurance decreased 30 percent in Minnesota during April compared with a year ago.
In contrast, a desk assembly plant in northwestern Wisconsin recently announced plans to close, resulting in 51 lost jobs. A major disk-drive manufacturer that employs about 3,500 in Minnesota will trim its total workforce by 7 percent.
Wage increases were modest. For example, farm operators in Minnesota, Wisconsin, and Michigan paid hired workers 2 percent more per hour in April compared with a year ago.
Some signs of price acceleration were noted. Tuition at the University of Minnesota is slated to increase 14 percent for the coming school year. Gasoline prices in Minnesota at the end of May were up 38 percent compared with a year earlier. A Minnesota meat company recently raised prices about 4 percent to 6 percent on packaged food items. A bank director noted that trucking fuel surcharges were up, and fertilizer prices were at an all time high. Drywall, lumber and cement have all gone up significantly, with many builders particularly concerned about the price of steel. Oriented strandboard prices increased over 200 percent from a year ago.