| Skip to content
|
The district economy last month maintained the strong momentum of the first months of the year, and there appear to be no major signs of substantial slowdown in the near future. Retail sales repeated a robust performance, construction activity gained further strength, and manufacturing activity remained fairly strong. Energy activity improved slightly last month from the weak performance poster earlier in the year. In the farm economy, average to above average yields are expected for the winter wheat crop, and growing conditions for corn and soybeans are excellent. In contrast, operators of cattle feedlots and hog producers continued to lose money. Labor markets in much of the district remained quite tight, with some continued evidence of moderate wage pressures. Prices generally held steady at the retail level and for most construction manufacturing materials. Prices edged down for most manufacturing materials, with slight increases for a few others.
Retail Sales
Retailers continued to report robust sales last month, well above year-ago levels. Almost all respondents expect sales over the next three months to maintain the strong pace registered so far this year. Inventories last month expanded slightly, but most retailers are satisfied with current stocks and plan no major changes in the next several months. Automobile dealers reported improved results last month, with overall sales moderately higher than a year ago. Sales of sport utility vehicles and light trucks remained strong, while sales of new passenger cars improved due to incentives such as rebates and low finance rates. Inventories edged up, leaving most dealers generally satisfied with current stock levels. Respondents expect to increase inventories slightly in the coming months, however, to match seasonally stronger sales.
Manufacturing
Manufacturing activity remained strong last month with plants operating at high levels of capacity. Materials were generally available, except for a few items such as synthetic rubber. Relatively fewer respondents reported increases in lead times compared with the last survey period. Many managers are unsatisfied with current stock levels after watching inventories expand slightly last month. Almost all respondents plan to trim inventories in the near future. A quarterly survey of district manufacturers indicated that production, shipments, and new orders all gained strength in April in contrast to seasonally low growth rates in the first months of the year.
Housing
Builders reported housing starts were up again last month, solidly above levels of a year ago. Additionally, builders anticipate further gains in construction activity in the coming months due primarily to strong economic fundamentals. Sales of new homes rose modestly last month, remaining substantially above year-ago levels. Inventories of unsold new homes are at low to moderate levels. Mortgage lenders say demand edged down last month but remained well above year-ago levels. Refinancing continued to lead mortgage activities. Lenders expect mortgage demand to stay strong over the next three months.
Banking
Bankers report that loans and deposits both edged up last month, leaving loan-deposit ratios unchanged. Consumer loans, residential construction loans, and agricultural loans all rose, while commercial and industrial loans declined somewhat. Increases in demand deposits, NOW accounts, and money market deposit accounts were partly offset by a decline 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 held their consumer lending rates constant and anticipate no future changes. Lending standards were generally unchanged.
Energy
District energy activity improved marginally last month, despite lower energy prices. Natural gas prices fell in May, offsetting most of the gains registered in the two previous months. Crude oil prices fell again last month after a brief improvement in April. The district rig count rose 2.1 percent in May but remained 15.9 percent below year-ago levels.
Agriculture
The district's winter wheat crop is in good condition with average to above average yields expected in most areas, with overall harvest below last year's level due to low plantings. Spring planting is complete for corn and nearly complete for soybeans. Favorable weather following planting has led to excellent growing conditions for both crops. Operators of cattle feedlots in the district continued to lose money last month, although the outlook is expected to improve later this year. Hog producers are expected to experience continued losses for the remainder of the year.
Wages and Prices
Labor markets remained very tight last month in much of the district, with continued, but not increasing, evidence of moderate wage pressures. Despite persistent problems hiring entry-level workers, fewer manufacturers reported general labor shortages this time compared to recent past months. In contrast, an increasing number of retailers were unable to fill positions in almost all levels. Similarly, continued robust construction activity resulted in builders facing strong labor shortages across the board, and even more severe for select trades such as framers. About half of the builders contacted indicated they have turned down work due to labor shortages. Despite tight labor markets, firms reported that wage pressures are moderate and stable, except for specific scarce skilled workers, such as information technology employees. Prices held steady at the retail level. Prices declined slightly for most manufacturing materials but edged up for a few specific items such as synthetic rubber and wires. Prices of construction materials were generally unchanged, with cement prices edging up in some locations. Retailers expect no major price changes in the coming months.
|
Minneapolis