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The district economy continued to grow at a moderate pace during the past month. Retail sales edged up, manufacturing and construction activity remained moderately strong, and energy activity improved somewhat. In the farm economy, favorable weather brightened income prospects for crop producers, and stronger cattle prices brought profits to some cattle producers. Labor markets remained tight in much of the district, and reports of wage increases became more common. Prices increased for some materials used in manufacturing and construction. At the retail level, prices were generally steady.
Retail Sales
Retailers report sales edged up during the past month but changed little from last year's level. Sales of women's apparel were strong, while sales of appliances and other "big-ticket" items were weak. Retailers remain optimistic that sales will increase over the rest of the year. Most retailers were satisfied with their inventory levels, and only a few plan to trim inventories during the next several months. Automobile dealers report sales slowed slightly last month as a result of some easing in demand and limited availability of popular models. Sales are expected to be fairly strong over the remainder of the year, however. Dealers have been expanding inventories but still do not have as many light trucks and sport utility vehicles as they would like.
Manufacturing
Manufacturers operated last month at moderately high levels of capacity. Manufacturing materials were generally available, with lead times increasing somewhat for steel but holding steady for other items. Most manufacturers were satisfied with their inventory levels.
Housing
Builders report housing starts slowed last month yet remained stronger than a year ago. Starts of both single-family homes and multifamily units declined. Builders expect no further decline in construction activity, except for the normal seasonal slowdown toward the end of the year. Sales of new homes also slipped last month. Most building materials were readily available, and delivery times were normal. Mortgage lenders report some slowing in demand last month and expect some further slowing the rest of the year.
Banking
Bankers report that both loans and deposits were up slightly last month, leaving loan-to-deposit ratios essentially unchanged. Commercial and industrial loans, consumer loans, home equity loans, and commercial real estate loans all edged up. Demand deposits and money market deposit accounts increased slightly, outweighing a modest decrease in large CDs and small time and savings deposits.
All respondent banks held their prime lending rates steady last month, and almost all expect to leave rates unchanged in the near term. Most banks also held their consumer lending rates steady and plan no changes in the near future. Lending standards were unchanged at most banks.
Energy
District energy activity improved somewhat last month, as higher oil prices offset the negative effect of lower natural gas prices. The district rig count rose 3.5 percent from August and was unchanged from its year-ago level.
Agriculture
The district's corn and soybean harvest is slightly behind schedule due to wet weather. Reported crop yields are mostly good to excellent, except in parts of western Nebraska and northeast Colorado, where crops sustained extensive hail damage. The wet weather has delayed planting of the district's winter wheat crop. Most cattle ranchers continue to post losses but cattle feeders have returned to profitability. As a result of stronger fed cattle prices, feedlots are filling quickly. The large inflow of cattle is expected to put downward pressure on prices as the cattle are marketed next winter and spring.
Wages and Prices
Labor markets were still tight last month and reports of rising wages increased. Almost all retailers report they have increased wages recently to attract qualified workers. Manufacturers report skilled and unskilled workers remained in short supply, and a greater fraction of companies than in past months say they have responded by increasing wages. Prices held steady at the retail level but rose for some manufacturing and construction materials. Retailers expect no major price changes in the months ahead.
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Minneapolis