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Midsummer finds the Ninth District economy experiencing continued moderate growth. Construction seems indefatigable. Despite some slowing in residential construction, employment and overall activity for the sector continue to grow apace. Sales of autos and consumer goods are solid. Manufacturers describe strong output and do not report problems with inventories or with securing inputs. Oil and gas activity is very strong. Forest products firms in the eastern part of the district report steady output, but there has been noticeable slowing in Montana. Farmers have been on a weather roller coaster, and prospects are for a good to average crop. Beef and hog producers continue to enjoy higher prices than a year ago, with output largely steady. Unemployment rates are low in most areas, and employment numbers high. Product prices show little, if any, increase.
Two areas show some problems. Output is slowing somewhat at a few iron mines in the face of higher output inventories and ongoing structural change in the steel industry. The summer season is disappointing to tourist businesses in many areas, with visitation rates somewhat below last year's levels.
Construction and Real Estate
"Lots of contracts," says a general manager for a commercial builder operating in South Dakota and Minnesota. Publicly let contracts in those states and in North Dakota through June ran 14 percent ahead of 1996, which itself had been considered very strong. Furthermore, there are no signs of slackening in commercial and public-sector work.
Residential permit numbers in Minnesota have slowed somewhat compared to one-year and two-year-ago levels, particularly in apartment buildings. Nevertheless, construction employment for that state is 4 percent above 1996 and 12 percent above 1995, indicating that the sector as a whole remains strong. Both commercial and residential building also continue to be strong in western Wisconsin and in southeastern South Dakota.
Markets for existing real estate are also brisk. "It's really a sellers' market," says one St. Paul, Minnesota, suburban residential realtor. Commercial property rental markets also are active.
Natural Resource Industries
With 28 rigs drilling in North Dakota and Montana, oil and gas exploration and development is at its highest level in more than a decade. After several years of slow decline, oil production is slowly rising as new wells come on line. Sawmills, building board manufacturers and paper mills in Minnesota, Wisconsin, and Michigan's Upper Peninsula describe output as steady, but there is a noticeable decrease in forest production in Montana, with two sawmills and a cardboard plant reportedly closing. Iron mining in the Lake Superior region shows some signs of slowing after two years of all-out production. One mine is laying off 70 workers and some others are reportedly contemplating production cuts in the face of ore pellet inventories 25 percent higher than a year ago. But a steel industry source says this is more a result of continuing structural change in the sector, as mini-mill output continues to grow at the expense of integrated producers, and not as the result of any slowing of demand for steel products.
Manufacturing
"Good sales; we have work for some time," reports a large iron foundry manager in Minneapolis. "Somewhat better than last year," says a specialty agricultural implement builder in North Dakota. These comments are representative of many across the manufacturing sector, which seems characterized by solid, but not spectacular growth.
Agriculture
"Most of the second cutting is just junk," says an extension agent in west-central Minnesota, where rains repeatedly soaked drying hay, reducing its quality. Hay supplies remain well below usual levels and prices high in many areas of the district. Farmers have been on a weather roller coaster this summer as near-drought in June turned into excessive rain, hail, and successive thunderstorms in July. On the whole, crops in most areas are in good, but not excellent, condition. USDA's predicted spring wheat yields for North Dakota are down about 25 percent compared with 1996 and those for Minnesota are down about 10 percent. In corn-soy areas, prospects are for an average crop. Hog and cattle producers continue to enjoy higher prices than a year ago, and bankers who responded to the second quarter survey of agricultural credit conditions by the Minneapolis Fed generally are more optimistic about prospects for their cattle-producing customers.
Consumer Spending and Tourism
"Pretty good sales-varies a bit by locality, but on the whole pretty good," is the assessment of a South Dakota automobile dealer's spokesman. "Sales are strong for most models," is the report from a dealer in Wisconsin. New vehicle registrations in most states show moderate increases above 1996 levels for the year to date.
"We are very busy," comments the manager of a Grand Forks, N.D., discount store. "People are buying lots of things to replace items damaged by the flood." Even without that special circumstance, retail sales in other areas also appear vigorous. Sales tax receipts on general merchandise reportedly are running ahead of projections in Minnesota, Wisconsin, and the Dakotas. Retail chains generally report good revenues and earnings.
But tourism is the soft side of household spending. Visits at national parks and monuments in western regions of the district are trailing 1996 by as much as 20 percent. Canoe outfitters in northern Minnesota describe bookings as somewhat slack, and recurring rain storms have slowed other summer recreation activities in Minnesota, northern Wisconsin and the Upper Peninsula. Fishing resorts describe moderate, steady business. One bright spot: Large areas of open water in the prairie pothole regions of eastern North Dakota and South Dakota bode well for fall waterfowl hunting.
Employment, Wages, and Prices
"We really need more workers," says a job service official in Grand Forks, where the unemployment rate was 2.9 percent before April flooding. "I just can't get all the people I need," says a St. Paul, commercial builder. "In our production areas, we have people speaking five languages," says an educational specialties manufacturer. "It is just hard to get people." Such labor market tightness dominated the discussion at a July meeting of CEOs from major firms at the Minneapolis Fed. Only in Montana and the Upper Peninsula are labor markets somewhat slack and unemployment rates above the national average. Employers report increasing wage pressures and renewed increases in health care costs after a two-year hiatus.
But product prices for intermediate and final goods remain quiescent. Gasoline prices have dropped a cent or two from late spring and are a few cents below summer 1996 levels.
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