|
The Ninth District economy grew modestly since the last report. Growth was noted in consumer spending, tourism, services, commercial construction and real estate, manufacturing, energy, mining and agriculture. Residential construction and real estate activity was slow. A number of contacts reported tight labor conditions in their industries or regions, and overall wage increases were moderate. Prices for gasoline have eased since the last report.
Consumer Spending and Tourism
Consumer spending increased moderately. A major Minneapolis-based retailer reported it expects same-store sales to increase about 6 percent in August compared with a year earlier. July sales at a Montana mall were about 5 percent above last year's levels. A mall in North Dakota reported traffic up about 2 percent in August compared with a year ago. Steady traffic during late July and August was reported at a mall in the Minneapolis area. Business at two Minnesota auto dealers was up over the past couple of months, especially for more fuel-efficient vehicles. However, looking forward, a contact noted that some retailers are concerned about the impact year-end adjustments in mortgage interest rates could have on household cash flow and holiday spending.
Tourism activity was higher than a year ago. A tourism official in South Dakota reported that activity was up about 8 percent in July compared with a year ago; relatively high gas prices didn't seem to deter travelers to the area. Retailers and tourism-related businesses in northwestern Wisconsin reported solid traffic and sales; dry, warm weather generally helped tourism activity, although river water levels were low for kayaking and canoeing. A tourism official in Montana reported year-to-date visits to Glacier National Park up 11 percent and Yellowstone National Park up 9 percent.
Services
Contacts from the professional business services sector noted continued growth. Law firms reported strong billings and increased competition. Contacts that support the health care industry saw increased demand. Activity was up at an information technology consulting firm. An executive search firm reported that activity was "heating up." A representative from a large management consulting firm indicated solid growth in billings and new business. Contacts from the financial services industry reported some disruptions to operations due to credit market constraints.
Construction and Real Estate
Commercial construction was up. July commercial building permits in St. Cloud, Minn., increased 15 percent from a year ago. Developers announced plans for a 500,000 square foot retail center along the I-94 corridor in Hudson, Wis. Minneapolis will receive $250 million in federal funds to replace the collapsed I-35W bridge. Residential construction remained slow, but showed signs of improvement in some areas. Permitted units in July were down 7 percent in Minneapolis-St. Paul from a year earlier. In Sioux Falls, S.D., July residential permits were up 9 percent over year-earlier levels.
Commercial real estate was up slightly. Vacancy rates for office, industrial and medical space in Minneapolis-St. Paul all declined through the second quarter of this year, though retail vacancy increased slightly. A contact in Fargo, N.D., said market activity there was moving at a healthy pace. Residential real estate was slow, with some exceptions. Home sales in Minneapolis-St. Paul increased 2 percent from June to July, but were down from year-earlier levels, and the inventory of homes for sale is large and growing. However, in Sioux Falls, sales were on track to match or beat last year's record levels. A director from western Montana indicated sales are still strong, but inventory is up significantly compared with the past two years.
Manufacturing
The manufacturing sector grew since the last report. A July survey of purchasing managers by Creighton University (Omaha, Neb.) indicated increased manufacturing activity in Minnesota and the Dakotas. In South Dakota, a trailer manufacturer recently announced plans to build a new plant, and a mining equipment company plans to expand a facility. In North Dakota, an agricultural processing plant is expanding.
Energy and Mining
Activity in the energy and mining sectors increased since the last report. New wind energy projects were recently announced. Oil and gas exploration and production in the District were level from previously reported amounts. Production at most mines remained at near capacity; several mines are looking to expand, and permitting activity is under way. An iron mining company plans to build a nugget plant in the Upper Peninsula of Michigan.
Agriculture
Agricultural conditions improved since the last report. Preliminary results of the Minneapolis Fed's recent survey of agricultural credit conditions indicate that lenders expect overall agricultural income and spending to be up in the third quarter of 2007 due to higher selling prices and decent yields. Growers in North Dakota expect higher income with a record wheat crop and strong prices. Bountiful fruit harvests are occurring across the District. The U.S. Department of Agriculture reported that crop progress was ahead of the five-year average for many District crops. However, yield expectations were reduced in many parts of the District due to increased drought. Recent heavy rainfall caused flooding and crop loss in southeastern Minnesota and western Wisconsin.
Employment, Wages, and Prices
A number of contacts reported tight labor conditions in their industries or regions. While some employers in the construction industry noted less difficulty finding workers than in the past couple of years, finding qualified workers in a number of specialty trades was difficult. In eastern South Dakota, companies in light industrial manufacturing and health care were having trouble finding qualified workers. An economist in Montana reported that employers often note difficulty finding skilled and well-trained employees. Some fast food employers in Montana have hired younger workers or have outsourced drive-through orders to a call center. The opening of a bank call center this fall in northwestern Wisconsin will create 70 jobs in the area. In contrast, a plant in Minnesota that makes frozen products for retail bakeries and food services recently announced plans to eliminate 95 jobs.
Overall wage increases were moderate. Wages for manufacturing workers increased 1.7 percent for the three-month period ended in July. Hired workers at farms in Michigan, Wisconsin and Minnesota were paid only 4 cents per hour more in July compared with the same period a year ago.
Prices for gasoline have eased recently. Minnesota gasoline prices in mid-August were almost 30 cents per gallon lower than in mid-July and slightly lower than a year ago. Recent increases in natural gas prices showed signs of easing in late August. A bank director noted that while increases in health insurance costs remained relatively large, insurance rates for workers' compensation were slightly lower than a year ago.
|
St. Louis