July 26, 2006
Federal Reserve Districts
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The Ninth District economy grew moderately since the last report. Increases in activity were noted in consumer spending, manufacturing, mining, energy, agriculture, and commercial real estate. Meanwhile, residential real estate and construction softened. Tourism and commercial construction were steady. Since the last report, labor markets showed signs of tightening and wage increases were moderate. Significant price increases were noted for fuel, shipping, and brass.
Consumer Spending and Tourism
A Minneapolis area domestic auto dealer noted weak June sales, but an uptick in early July; overall truck sales were slow. Recent domestic vehicle sales were very slow, while foreign car and light truck sales were relatively strong, according to an auto dealer in Minnesota.
Despite higher gas prices, overall tourism activity was on a par with a year ago. A recent survey of Minnesota hotel and resort owners showed that about 75 percent of respondents expect the summer tourism season to match or exceed last year. A chamber of commerce official in northeastern Minnesota observed that traffic and lodging levels in May and June were about the same as a year ago. In the Upper Peninsula of Michigan, a tourism official said that tourism businesses are hoping for a summer as good as last year's strong season, but they don't expect to surpass it. A South Dakota tourism official reported that activity was level compared with last summer. Tourism officials in Montana expect the summer season to equal or surpass year-ago levels. Visits to Yellowstone National Park were up 2 percent in May from a year earlier, while Glacier National Park visits were down 23 percent because of late road openings due to heavy winter snowfall.
Construction and Real Estate
Residential real estate was slow, whereas commercial activity was brisk. June sales volume was down 14 percent from year-earlier levels in Minneapolis-St. Paul. Realtors in Fargo and Sioux Falls reported slower sales than at this time last year. A director in western Montana reported softening as homes stayed on the market longer and prices remained level. Meanwhile, the Minneapolis-St. Paul industrial market finished its sixth consecutive quarter of positive absorption. An analyst characterized the office market there as having finally left its recovery phase and headed into an expansion.
Energy and Mining
Employment, Wages and Prices
In contrast, a financial services company recently announced plans to close a Minnesota call center due to company restructuring that will lay off 450 workers. A Minneapolis area hospital recently announced plans to cut 250 jobs in response to stagnant patient admissions and low government reimbursement rates.
Overall wage increases were moderate with a slight increase in trend for lower-skilled jobs in some parts of the District. The aforementioned St. Cloud survey shows that 51 percent of respondents expect to increase employee compensation over the next six months. Employers hiring workers for low-skilled positions in Billings, Mont., have recently raised pay to attract qualified applicants.
Price increases were noted for fuel, shipping, and brass. Early July gasoline prices in Minnesota were more than 80 cents a gallon higher than a year ago. Two manufacturers in the Minneapolis-St. Paul area noted that fuel surcharges have increased shipping costs between 10 percent and 20 percent. Liquified petroleum gas prices were about 30 percent higher than a year ago. Brass prices were up significantly compared with a year ago. Several bank directors noted a slowing in the increase in health care costs over the past year for companies in their area.