The Federal Reserve Board eagle logo links to home page

Beige Book logo links to Beige Book home page for year currently displayed July 31, 2002

Federal Reserve Districts


Ninth District - Minneapolis

Skip to content
Summary

Districts
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco

Full report

The Ninth District economy appears to have expanded modestly from early June through mid-July. Agriculture, consumer spending, residential construction, tourism and manufacturing grew. Meanwhile, the energy and mining sectors were level and commercial construction contracted. From early June through mid-July, labor markets, wages and prices stabilized. However, significant price increases in insurance, plastics, steel and residential real estate were noted.

Construction and Real Estate
Commercial construction is slower than a year ago. Recent office vacancy rates are creeping higher in the Minneapolis-St. Paul area and are expected to rise at least until next year, according to a commercial real estate company representative. As a result, prospective tenants have recently found reduced rents and more space-improvement funds available. Contracts awarded for private building projects in Minnesota and the Dakotas decreased 17 percent during the three-month period ending in May compared with last year; however, road and bridge construction was up 24 percent. Furthermore, many large-scale construction projects are under way in the Upper Peninsula of Michigan, according to an official.

Residential construction is strong, while home real estate activity is steady. In the Minneapolis-St. Paul area, housing units authorized for June year to date increased 16 percent compared with a year ago. In May, more homes were for sale compared with the same period last year in the Minneapolis-St. Paul area, keeping residential sales activity steady but not as frenzied as a year ago, according to a realtors association representative. The pace of recent residential construction in Sioux Falls, S.D., is slightly ahead of a year ago, according to a building official; however, apartment vacancy rates are at the highest level since 1996 due to high levels of multifamily building over the past two years.

Consumer Spending and Tourism
Consumer spending is somewhat higher than a year ago. A major Minneapolis-based department store retailer reported that overall same-store sales in June were 4.9 percent higher compared with a year earlier. A manager at a North Dakota mall reported June same-store sales up about 4 percent over last year. Recent foot traffic was reported higher at a Minneapolis area mall compared with last year, while a manager at another Minneapolis area mall reported flat traffic and sales. However, a Minnesota-based leather products retailer reported that same-store sales at its chain of stores were down 6 percent in June compared with a year ago.

Auto sales in Montana improved in June compared with the previous few months, according to a Montana bank director. However, an automobile dealer association representative in Minnesota noted generally slower business in June compared with last year, particularly at dealerships located outside the Minneapolis-St. Paul area.

Tourism is strong in several areas. In the La Crosse, Wis., area summer tourism is off to a good start compared with last year, according to an official. Most hotels and resorts surveyed in Minnesota at the end of June by the state tourism office reported the same or higher occupancy than a year ago, except for the Minneapolis-St. Paul area, where about half of respondents reported lower occupancy levels. Tourists were recently evacuated from Deadwood, S.D., for two days due to forest fires; however, business recovered quickly according to a tourism official. Visits to Mount Rushmore were up 23 percent in June compared with last year.

Manufacturing
Manufacturing activity increased. A June survey of purchasing managers by Creighton University (Omaha, Neb.) indicated increases in manufacturing activity in Minnesota and the Dakotas. A Minnesota all-terrain vehicle manufacturer recently reported strong demand for its products. In South Dakota, a sewing plant plans to expand employment after receiving a recent order from the U.S. Department of Defense. A plastic products producer in the Upper Peninsula of Michigan is purchasing equipment and expanding employment as a result of increased orders. An emergency services equipment manufacturer in western Wisconsin plans to quadruple the size of its operations with a $2.9 million expansion, and a brewery recently increased output due to strong demand. However, a Minnesota brewery recently closed.

Energy and Mining
Activity in the energy and mining sectors is level. Early July district oil and natural gas exploration and production levels were about even with early June levels. Meanwhile, early July iron ore output is about level with the previous month, according to an industry spokesperson. However, a Montana platinum mine plans to expand output throughout 2002.

Agriculture
The overall agricultural economy has brightened since early June. Rains aided reservoir and irrigation systems, but the drought continues in parts of the district. An early June "perfect storm" in Montana should help provide the biggest wheat crop since 1997, according to a Montana bank director. Meanwhile, the U.S. Department of Agriculture reported above-normal progress for most district crops. For example, 50 percent of the Minnesota and 44 percent of the South Dakota soybean crop was blooming in mid-July compared with the five-year average of 35 percent and 32 percent respectively. However, about 40 percent of a large cooperative's sugar beet acres were damaged by recent flooding and poor springtime weather.

Employment, Wages, and Prices
Labor markets remained at about the same level as the last report, with a mix of layoff and expansion announcements. A telecommunications company will lay off 400 Minnesota employees over the next few months. An electronics retailer recently announced plans to close its 400-employee distribution center in Minnesota. The closure of a western Wisconsin manufacturer of fitness equipment and small appliances will result in 100 job losses. A bank director reported that most company contacts do not plan to increase employment over the next few months.

In contrast, the expansion of a Minnesota furniture store could increase its staffing levels by up to 130 employees by next year. A Minnesota e-commerce company recently announced plans to add up to 90 employees to its sales department. A proposed call center in South Dakota would initially employ 150 workers, potentially expanding to 500 in five years. Furthermore, the number of initial claims for unemployment in Minnesota decreased about 8 percent in June compared with the same month last year.

Wage increases are moderate. A Montana bank director reported employers in northeast Montana expect to increase wages about 3 percent or lower. Hourly wages for district manufacturing workers increased 2.9 percent for the three-month period ending in May.

Price increases are modest, except in insurance, plastics, steel and real estate. Several bank directors reported little growth in overall prices. However, Minnesota's health maintenance organizations recently reported an increase in premium revenue per member by 14 percent over a year ago. A bank director reported recent significant price increases for plastics and steel compared with a year ago. The median price for a home in Minneapolis-St. Paul increased almost 7 percent in May compared with a year ago.

Return to topReturn to top

Previous St. Louis Kansas City Next


Home | Monetary Policy | 2002 calendar
Accessibility
To comment on this site, please fill out our feedback form.
Last update: July 31, 2002