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Despite winter's last blast in a severe blizzard April 4-6 and record flooding in the Red River Valley, moderate economic growth continues in the Ninth District. Construction is rolling into yet another strong season. Output remains strong in most natural resource sectors, despite some decline in oil drilling. Manufacturers report good sales and note few input bottlenecks or other impediments to production. Retailers describe generally good sales. After a somewhat spotty winter recreation season, tourism businesses are generally optimistic about the 1997 summer season. Employment levels remain high, and there are some indications of wage pressures in manufacturing. But there are few reports of price increases for goods and services, and fuel prices have dropped slightly.
On the negative side, this historic winter's last blasts caused additional deaths in Dakota beef herds and unusually high mortality among the new calf crop. Flooding is causing unprecedented damage in the Red River Valley on the North Dakota-Minnesota border and will cause some delay in planting crops.
Construction and Real Estate
"We have plenty of work lined up," reports a Sioux Falls, S.D. home builder. "It isn't slowing down any," echoes a counterpart from Eau Claire, Wis. Such comments are typical in a sector that continues as an important source of economic growth. Publicly let heavy construction in Minnesota and the Dakotas is strong for the third consecutive year. Construction employment levels in Minnesota running 7.5 percent above the same months in 1996 and 14 percent above 1995 are yet further evidence of strength in this sector. In Butte, Mont., work will soon start on a $470 million silicon plant that will employ nearly 1,000 construction workers in 1997-1998. Repair and replacement of flood-damaged buildings and infrastructure in eastern North Dakota and northwestern Minnesota will place great demand on available construction resources once waters recede.
Markets for existing housing have softened somewhat in Minnesota after exceptional strength early in the year. Similar easing is reported in Montana. But commercial property vacancy rates continue to decline in Minneapolis-St. Paul, and one financial services firm has announced plans to build facilities for 1,300 employees in a St. Paul suburb.
Natural Resource Industries
Drilling rig counts in North Dakota are down compared to year-earlier levels, but oil production is up about 10 percent, reflecting the contribution of new wells drilled in 1996. At least two rigs are drilling in northwestern South Dakota, into the same formations as the new North Dakota wells, and Montana drilling for oil and gas is well above year-ago levels. Iron mines are running at capacity. Plants producing oriented-strand board, a plywood substitute, still face depressed prices and are catching up on maintenance. But allowable cuttings on federal land in Montana are expected to rise in 1997, leading to higher employment and output in that state's timber industry. Paper producers report somewhat improved sales after the slump last year, but complain of stiff import competition from Scandinavia, attributed in part to strengthening of the U.S. dollar.
Manufacturing
"Business is pretty good," says an owner of a Minnesota metal stamping firm. "We have plenty of orders," reports a manager of a South Dakota light manufacturer. A Minnesota building products manufacturer says, "Business is just excellent, all the plants are running flat out." On the whole, reports from manufacturers outline a sector facing good business conditions with few problems on the horizon. Many plan investment in new plant or equipment this year. Most describe inventories as normal. Particularly good sales and earnings reports from many small, publicly traded firms producing electronic, medical, electro-chemical and other high-tech products are another indication of strength.
Agriculture
"It was really rough," says a South Dakota rancher describing an intense blizzard across parts of the Dakotas and Minnesota on April 4-6 that added insult to injury for beef producers. North Dakota officials estimate losses over the entire winter equal to 10 percent of the stock cow herd, and higher than usual mortality among newborn calves. South Dakota officials estimated losses at 7 percent before this blizzard and describe losses as substantial. The proportions of the herds described in "poor" or "very poor" condition by state agricultural statistics services are the highest in four years.
Cold weather across the region and flooding in some areas has kept most farmers out of the field, and extension officials predict somewhat late planting in many areas. Soil temperatures remain below normal levels. However, by April 28, small grain planting was underway in several areas, and corn reportedly was planted in a few. It is too early to determine what effects any delays may have on output. Some agronomists note that planting was late in many areas of the region in 1996, but yields were above average.
Consumer Spending and Tourism
"Traffic has been pretty good since it warmed up," says a South Dakota mall manager. Other retailers also report generally good sales but continue to describe a business environment with sharp competition and very careful price comparisons by consumers.
Vehicle sales vary by region. "It has been pretty slow the last few weeks, but it had been good in March," reports one South Dakota auto dealers' spokesman citing weather uncertainty as damping farmers' willingness to buy. Reports from North Dakota stress interruptions by storms and floods. In urban areas of Minnesota, one dealer described sales as "pretty good, but not spectacular." But sales were hot in Billings, Mont., where 21 percent more vehicles were sold in January and February than a year earlier. Sales since then are described as "very good."
After a mixed winter season, with some activities disrupted by intense cold, tourism officials and operators are generally optimistic about the 1997 summer season. Montana officials note a substantial increase in inquiries compared to a year ago. A Minnesota resort owner says, "We will have a good summer." Most sources describe great competition and a few worry that the stronger dollar will make foreign vacations relatively more attractive.
Employment, Wages and Prices
Unemployment rates remain low and below national levels in all areas except Montana and Michigan's Upper Peninsula. Employers continue to list difficulty in securing qualified workers as an important problem, particularly in western Wisconsin, eastern South Dakota and the Minneapolis-St. Paul metropolitan area. There is some evidence of wage pressures; hourly earnings in manufacturing in Minneapolis-St. Paul in February were 4.5 percent above year-earlier levels. Employers also report sharp increases in compensation for programmers and other computer professionals.
On the price side, there are few reports of price increases for raw materials, intermediate goods or at the consumer level. Gasoline and diesel fuel prices began to drop in April, but remain slightly above spring 1996 levels.
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