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From late February through mid-April,
the overall Ninth District economy demonstrated solid growth. Residential real
estate, manufacturing, agriculture, consumer spending, mining, energy and
tourism were up, while commercial real estate activity was slow. District
employment grew slightly. Wage increases and overall price increases for
consumer goods were modest; however, significant increases were noted in a
number of manufacturing and construction inputs and commodities.
Construction and Real Estate
Commercial construction was
generally slow. Contracts awarded for large construction projects in Minnesota and the Dakotas were down 1 percent for the three-month period ended in February
compared with a year ago. The value of permits for commercial construction
projects for the first three months of 2004 in Billings, Mont., were down
compared with the same period last year, but the number of permits was up
slightly. With recent vacancy rates at about 20 percent, rental rates in
several downtown Minneapolis office buildings are more than 15 percent lower
than five years ago. In contrast, a company plans to expand into as much as
100,000 square feet of additional office space in downtown Minneapolis, the
largest office space absorption in some time, according to a commercial real
estate company. Furthermore, a real estate developer noted increased activity
in industrial building on speculation in the Minneapolis-St. Paul area.
In contrast to
commercial construction, residential real estate activity generally grew. Home
sales activity was brisk in February and March in the Minneapolis-St. Paul
area, according to a representative of a realtors association. Home closings
increased almost 2 percent in Billings, Mont., during February compared with a
year ago. Housing units authorized in district states; however, were down 4
percent for the three-month period ended in February compared with a year ago.
In addition, recent apartment vacancy rates in Sioux Falls, S.D., reached 10
percent.
Consumer Spending and Tourism
Overall consumer spending
increased moderately. A major Minneapolis-based retailer reported same-store
sales during March were 7 percent higher than a year ago. Traffic in February
and March was up about 6 percent at a South Dakota mall compared with last
year. February same-store sales at a North Dakota mall were up 2 percent to 3
percent compared with a year ago. Two Minneapolis area mall managers reported
that same-store sales were up about 10 percent for February compared with a
year ago and reported optimism for spring and summer sales.
Auto sales were up in
February after a very slow January, while sales in March were strong, according
to a Minnesota auto dealer.
Winter tourism
finished the year sturdily in many parts of the district. Snowmobiling and
cross country skiing activity was well above year-ago levels and ran late into
the season in northwestern Wisconsin, according to a chamber of commerce
official. Convention bookings in Duluth, Minn., were recently reported up by 25
percent in 2004. However, winter use of Yellowstone National Park was down 18
percent, primarily due to issues regarding snowmobile regulations. Tourism
officials and resort owners are optimistic for a healthy summer season in
northern Minnesota.
Manufacturing
Manufacturing activity increased.
A March survey of purchasing managers by Creighton University (Omaha, Neb.) indicated robust growth in manufacturing activity in the Dakotas and Minnesota. Several Minnesota manufacturers noted strong demand and have added work shifts, employees
and machines. A new beef processing plant is planned for South Dakota. A
hydraulic machinery fabricator in western Wisconsin plans a major expansion. In
Montana, a linerboard facility, formerly at risk of closing, will remain open
due to increased demand. However, in Minnesota, an industrial baking equipment
manufacturer reduced production due to low orders, and an ammunition plant will
shut down and move production to a facility outside the district. In western Wisconsin, an industrial automation company will close a plant and move production to other
facilities in the United States.
Energy and Mining
Activity in the energy and mining
sectors increased. Late March district oil and natural gas exploration and
production amounts increased from early February levels. In addition, progress
on several wind-energy and other energy projects has accelerated. Meanwhile,
prices for most major district mining commodities remain strong. District iron
ore mines continue to produce at capacity and "can't make pellets fast
enough," said an iron mining official. In Montana a mining official noted
that the higher mining commodity prices "have increased the health of the
existing companies, but as yet we have not seen this transition into
significant exploration."
Agriculture
Agricultural conditions are positive.
Prices remained robust for most district agricultural commodities. The U.S.
Department of Agriculture reported that mid-March prices for livestock, corn
and soybeans increased significantly from February. Dairy producers in Wisconsin expected record prices for their milk in March. District farmers intend to plant
more acres of soybeans and fewer acres of wheat in 2004 compared with 2003.
Even though the western part of Montana still faces extreme drought, late
winter and early spring storms reduced drought pressures across most of the
district. Calving and lambing are on schedule. About 40 percent of the winter
wheat crop in Montana and South Dakota is rated good or excellent.
Employment, Wages and Prices
Employment increased slightly since
the last report with signs of future increases. Nonfarm employment increased
0.9 percent in February compared with a year earlier, the fastest
year-over-year rate of growth since January 2001. In South Dakota, a trailer manufacturer
plans to create up to 35 jobs beginning this spring and the aforementioned beef
processing plant is expected to eventually create 300 jobs. A temporary
staffing agency survey showed that 32 percent of employers in Minneapolis-St.
Paul expect to hire more workers during the second quarter of 2004 and 1
percent expect to reduce payrolls. Last year 18 percent expected to increase
payrolls and 7 percent planned reductions. A nursing shortage was reported in
several areas of the district.
In contrast, in Minnesota an energy company recently announced plans to reduce staff by 100 employees at
its headquarters, and a retirement services company will layoff 100 employees
due to consolidation. Recent announcements of closings and lay-offs in Eau Claire, Wis., will likely result in about 600 job losses.
Overall wage increases were modest, while health benefits remained a key issue in contract
disputes. During March and early April, over 2,000 bus workers were on strike
in the Minneapolis-St. Paul area, primarily over retiree health benefits.
Meanwhile, employment officials noted upward pressure on wages in Bozeman, Mont., due to the low unemployment rate (2.9 percent).
Overall price increases for consumer goods were modest, while significant increases were
noted in a number of manufacturing and construction inputs and commodities.
Helena bank directors noted that recent price increases were generally
moderate. The Billings, Mont., area consumer price index increased 0.3 percent
in February from January. Meanwhile, news reports and bank directors noted
significant price increases in several manufacturing and building materials,
including steel, copper, aluminum and lumber. Gasoline prices in Minnesota for the week of March 29 were up 13 percent from a year ago. Prices received by North Dakota farmers for agricultural products were up 10 percent in March compared with
the same month last year.
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