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Since the last report, economic growth in the Ninth District has picked up somewhat. Consumer spending, tourism, services, manufacturing, energy, and mining saw increases. Activity in the commercial and residential real estate sectors decreased, while commercial construction remained weak. Meanwhile, residential construction was mixed and progress in the agriculture sector slowed. Labor markets showed some signs of picking up; however, overall weakness continued. Wage increases were moderate, and overall prices remained relatively level.
Consumer Spending and Tourism
Consumer spending grew moderately. A major Minneapolis-based retailer reported that same-store sales in September were up about 1 percent compared with a year earlier. September traffic at a North Dakota mall was up over 10 percent from a year ago, which was a surprise following a slight decrease in August, according to the mall manager. Cooler fall weather seemed to attract shoppers. August sales were up over 10 percent at a Montana mall after a few consecutive months of small gains. August sales were up slightly from a year ago at a Minneapolis-St. Paul area mall. A restaurant chain noted that sales were up 3 percent during August and September from a year earlier. However, a Minnesota-based clothing retailer noted slow uptake of new merchandise offerings; it expects low single-digit increases in same-store sales over the next few months. September car sales in Montana were mixed, according to a representative of an auto dealers association.
Tourism activity was up from a year ago. Rooms sold at Montana hotels were up almost 11 percent in August from a year earlier, according to a state tourism research organization. A tourism official in the Upper Peninsula of Michigan noted that the summer season finished well ahead of a year ago and that fall traffic seems to be holding up. Minnesota lodging and campground operators noted increases in summer business from a year earlier and were more optimistic for fall tourism than a year ago, according to the results of a state survey. In addition, attendance at the Minnesota State Fair almost reached last year's record high.
Construction and Real Estate
Commercial construction was slow. A District manufacturer of commercial building materials said demand was slowing. The value of nonresidential permits in Sioux Falls, S.D., fell dramatically in September from a year earlier; in contrast, September commercial permits increased substantially in Rochester, Minn. Residential construction was mixed. The value of September residential permits increased 70 percent and 40 percent, respectively, in Fargo, N.D., and the Minneapolis-St. Paul area from a year ago. Meanwhile, residential permits fell 78 percent and 38 percent in value in Rochester and Sioux Falls, respectively.
Commercial real estate remained weak. In Minneapolis-St. Paul, about 20 percent of office space and 8 percent of retail space sat vacant in August. A commercial real estate broker in Fargo, N.D., said activity there was flat at low levels. Residential construction showed signs of stagnation. August closed home sales in Minneapolis-St. Paul fell almost 9 percent from a year earlier while prices decreased nearly 2 percent. In contrast, residential real estate contacts in Bismarck, N.D., described market activity there as busy.
Services
Activity in the professional business services sector increased since the last report. Appraisers and title companies reported continued strength during September. "We are swamped with great projects," commented a design and advertising firm. Information technology consulting firms noted solid interest from corporate clients. Contacts from firms that advise small businesses on mergers and sales noted less-than-robust growth during the past month. Some architects reported a surprising increase in activity: "We've weathered the storm and now find ourselves in calm waters," commented a large architectural firm.
Manufacturing
Manufacturing output was up since the last report. A September survey of purchasing managers by Creighton University (Omaha, Neb.) showed strong increases in manufacturing activity in Minnesota and South Dakota, and slight increases in North Dakota. In Montana, a food processing company is expanding operations and a jet engine plant plans to build a facility. In Minnesota, a fishing tackle company recently experienced a big pickup in demand, a metal fabricator saw increased orders, a dental part maker noted increased sales and a bed manufacturer's recent sales were up and higher than anticipated.
Energy and Mining
Activity in the energy and mining sectors increased since the last report. Late-September oil exploration increased slightly from late-August. New wind energy projects are planned in the Dakotas. Most District mines were operating near capacity. Iron ore production in Minnesota increased in August compared with July. A Montana copper miner noted that "we have been doing very well," and the short-term outlook was very positive.
Agriculture
Agricultural activity slowed due to wet weather. District crops were relatively large and in good condition. However, the cereal grains harvest in Montana was behind the pace of last year. Widespread wet conditions delayed some farmers from harvesting their bountiful crops. In addition, large amounts of rain in late September flooded rivers and saturated farmland from eastern South Dakota through western Wisconsin. Meanwhile, prices remained robust for many District agricultural products.
Employment, Wages, and Prices
Labor markets showed some signs of picking up; however, overall weakness continued. A department store chain with locations in Minnesota noted that it expects to increase seasonal hiring, while another large retailer will soon open a store in Minnesota with plans to hire about 130 employees. A manufacturer in northwestern Wisconsin noted an increase in hiring due to stronger orders. Minnesota initial claims for unemployment insurance were down 20 percent in September compared with a year earlier. According to respondents to a recent St. Cloud (Minn.) Area Business Outlook Survey, 19 percent expect to increase staffing levels at their companies over the next six months while 20 percent expect to decrease staff. In last year's survey, 15 percent expected to boost hiring while 24 percent anticipated decreases. In contrast, a Minneapolis-area hospital recently announced plans to lay off 200 employees.
Wage increases remained modest. For example, a county government in the Minneapolis-St. Paul area will award most nonunion employees a 1 percent raise.
Overall prices remained level. Minnesota gasoline prices were relatively stable since the last report. Residential natural gas prices were only about 5 percent higher than a year ago. However, scrap metal and plastic resin prices increased since the last report.
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