| Skip to content
|
The Ninth District economy displayed moderate growth since the last report. Growth was evident in consumer spending, manufacturing, construction, energy, and mining. However, agriculture and real estate were mixed, and tourism was flat. Employment grew modestly, and wages grew slightly. Significant price increases were noted in health insurance, natural gas, and cement.
Consumer Spending and Tourism
Overall consumer spending increased moderately. A North Dakota mall manager reported April sales up more than 7 percent from a year ago; May started slower but was picking up toward the later part of the month. A major Minneapolis-based retailer reported same-store sales up 5.1 percent in May compared with a year ago. A Minneapolis area mall manager characterized recent traffic as quiet, while a St. Paul area mall manager noted that there were "no big swings one way or the other." The number of foreign travelers visiting a major mall in the Minneapolis-St. Paul area increased to 6 percent of all visitors this year, up from 3 percent two years ago. Apparel sales were generally slow throughout the district due to unseasonably cool weather.
A St. Paul area auto dealer noted sales of domestic cars and trucks were down over 30 percent in May compared with a year ago. A representative of an auto dealers association in Minnesota reported that sales in late April and May were down from a year earlier.
Spring tourism was flat due to cool weather, but tourism officials are optimistic for the summer season. Recent hotel occupancy in St. Paul was down slightly from a year ago. According to an official, South Dakota tourism activity was slower in April and May compared with last year, but picked up during Memorial Day weekend; inquiries and advance bookings for the summer season were higher than a year ago. Bookings, reservations, and Web site visitor totals were at encouraging levels for Montana's summer tourism season, which is expected to increase 2 percent over last year.
Construction and Real Estate
Activity early in this year's construction season was solid. Construction for industrial space has shown signs of picking up in the Minneapolis-St. Paul area during 2005, according to a report from a commercial real estate firm. The U.S. Congress approved $80 million for military-related construction projects in Montana. Contract awards for large construction projects in Minnesota and the Dakotas were up 16 percent during the first quarter compared with the same period a year ago. However, during the three-month period ended in April, housing units authorized in district states were down 7 percent compared with the same period a year ago.
Real estate markets were mixed. Home foreclosures through April were up 17.7 percent in the Minneapolis-St. Paul area from the same period a year earlier. A St. Paul Realtor reported market time for selling houses increased slightly, and sellers must often make concessions on their asking prices. However, residential real estate markets in some other district cities, such as Fargo, N.D., and Duluth, Minn., remained strong. The Minneapolis-St. Paul commercial office market continued to recover, and growth in the industrial real estate market remained at a strong pace.
Manufacturing
Manufacturing activity expanded. A May survey of purchasing managers by Creighton University (Omaha, Neb.) indicated significantly increased manufacturing activity in the Dakotas and level activity in Minnesota. The survey indicated that durable goods manufacturing was gaining momentum. An informal survey of contacts revealed that most manufacturers plan to increase capital investment due to high sales expectations and little excess capacity. In South Dakota, a backhoe manufacturer recently announced a major expansion plan. In North Dakota, a soybean crushing plant is in the design phase. A defense manufacturer is building a new facility in Minnesota. However, a major automobile assembly plant in Minnesota furloughed workers for several weeks since the last report.
Energy and Mining
Activity in the energy and mining sectors increased. Oil and gas exploration and production increased significantly from early April through mid-May. In southern Minnesota, construction of a biodiesel plant is currently under way and another is planned. Mines across the district are producing at near full capacity. Expansions of existing mines and several new mines are planned in the district.
Agriculture
Economic activity in the agricultural sector was mixed. District farmers had problems getting in the fields to plant, and row crop development is below a year ago. The honey bee population is down significantly due to mite infestations, which may inhibit the pollination of district fruits, vegetables, and nuts. However, a bountiful winter wheat crop is expected in Montana and South Dakota, and the progress of the spring wheat and other small grain crops is significantly ahead of the five-year averages. Prices for many district agricultural commodities decreased in May compared with a year ago. The U.S. Department of Agriculture projects that prices will continue to drop into 2006 for corn, soybeans, wheat, milk, cattle, and hogs. Meanwhile, precipitation increased across the district, which reduced the severity of the drought. Agricultural land prices continue to increase. For example, the USDA reports that the average price of Minnesota farmland is up 12 percent from a year ago.
Employment, Wages, and Prices
Overall employment grew slightly. In Minnesota, a disk drive manufacturer expects to add 100 jobs this year due to strong demand, and a bottled soft drink sales and distribution center has recently added 95 jobs. A computer component plant in Eau Claire, Wis., has recently added about 300 workers. Members of the Minneapolis Fed's Advisory Council on Small Business and Labor noted that certain businesses were having difficulty finding qualified workers. A truck driver shortage was reported in several parts of the district.
In contrast, a brokerage and investment bank based in Minneapolis plans to lay off 90 people this summer. Also in Minnesota, a freezer plant laid off 130 workers, an electronics manufacturer recently reported plans to cut about 80 workers, and a circuit board plant closed, ending 60 jobs in the northern part of the state.
Wage increases remained modest. A Montana bank director noted that manufacturing businesses expect to increase wages slightly, tempering increases to compensate for higher health insurance premiums. Farm operators in an area including Minnesota and Wisconsin paid hired workers slightly less in April compared with a year earlier.
While price increases for consumer goods were generally moderate, significant increases were noted in health insurance, natural gas, and cement. Members of the Minneapolis Fed's Advisory Council reported that costs for several raw materials were well above year-ago levels; however, many businesses were not able to pass increases along to customers. A bank director noted that year-over-year health insurance cost increases were above 10 percent. Natural gas prices recently increased 15 percent to 30 percent above year-ago levels. Prices for cement recently increased and are about 10 percent higher than a year ago. Steel mill product prices decreased during the past few months, but were still nearly 20 percent higher than a year ago. Gasoline prices in Minnesota at the end of May were slightly lower than a year ago.
|
St. Louis