|
The District economy continued to grow moderately last month, though with a few signs of slowing. Manufacturing activity remained strong and energy activity improved further. Retail sales edged down, however, and construction activity eased somewhat. In the farm economy, the winter wheat harvest was much better than last year, spring crops were in good condition, and the cattle industry benefited from high prices and excellent pasture. Labor markets remained tight in much of the District, and some companies responded by increasing wages for entry-level workers and certain skilled positions. Prices generally held steady at the retail level while increasing slightly for some manufacturing materials.
Retail Sales
Retailers report sales edged down last month and were little changed from a year ago. Sales are expected to remain unchanged in the coming months. Retailers have been trimming inventories slightly but are generally satisfied with current stocks. Automobile dealers report sales were flat last month and unchanged from a year ago. Sales of light trucks and sport utility vehicles remained strong, while sales of domestic passenger vehicles were soft. Most dealers have been holding inventories steady and plan no major changes in the coming months because sales are expected to be stable.
Manufacturing
Manufacturers continued to operate at moderately high levels of capacity last month. Manufacturing materials were generally available, with lead times unchanged. Manufacturers have been trimming their inventories slightly, and some say they plan further reductions because stocks exceed desired levels.
Housing
Builders report housing starts edged down last month and were generally unchanged from a year ago. Builders expect construction activity to hold steady over the next several months. Sales of new homes were down slightly from the previous month and unchanged from a year ago. Most building materials were readily available and delivery times were normal. Mortgage lenders say demand was unchanged last month.
Banking
Bankers report that loans and deposits both increased slightly last month, leaving loan-deposit ratios little changed. Commercial and industrial loans were flat, while other loan categories showed small gains. Money market deposit accounts and demand deposits rose, outweighing declines in large CDs.
All respondent banks left their prime lending rates unchanged last month and expect to hold rates steady in the near term. Most banks did not change their consumer lending rates and anticipate no future changes. A few banks tightened their lending standards, citing concerns over credit quality.
Energy
District energy activity continued to improve last month and remained somewhat stronger than a year ago. Crude oil prices fell while natural gas prices edged up, but both oil and gas prices remained well below the peaks reached at the end of last year. The District rig count rose 3 percent in June to a level 12 percent higher than a year ago.
Agriculture
The winter wheat harvest in the District is nearly over. Crop yields are better than expected and will be well above last year's level. Wheat prices have fallen due to the larger wheat harvest, but District wheat producers will still earn bigger profits due to the good crop. Favorable weather has helped spring crops in the District develop at a normal pace, with most of the crops reported in better-than-average condition. Above-average yields are expected for corn and soybeans, and while larger supplies will put some downward pressure on prices, growers will likely earn solid profits.
District cattle feedlots are profitable, although a recent downturn in fed cattle prices has squeezed profits. The number of cattle in feedlots is higher than a year ago, suggesting that supplies of beef to consumers are likely to remain high and fed cattle prices could drift lower in coming weeks. Feedlots continue to market cattle as quickly as possible to stay ahead of falling prices. Meanwhile, excellent pasture conditions and high feeder cattle prices are yielding profits for most District ranchers, and ranchers are optimistic that the profits will continue this fall.
District hog producers are also enjoying a profitable year, and a new tide of pork exports to Japan may keep hog prices at profitable levels. Higher futures prices have encouraged existing hog operations to expand and large corporate farms to move into the District. While the increased production is boosting rural economic activity, many rural residents are concerned about the impacts on quality of life.
Wages and prices
Labor markets remained tight last month in much of the District, with some continued evidence of wage pressures. Employers say qualified entry-level workers and computer programmers were hard to find, and manufacturers report difficulty hiring engineers and skilled craftspeople. Some companies say they raised wages more than normal for entry-level workers and certain skilled positions, but other companies say wage increases were about normal. Prices held steady at the retail level while increasing slightly for some materials used in manufacturing. Retailers expect no major price changes in coming months.
|
Minneapolis