| Skip to content
|
Tenth District economic activity remained solid in January and early February. Retail sales stayed strong after the holidays, manufacturing activity held steady, and construction activity was largely unchanged despite some further slowing in home sales. Activity in the energy sector was also stable following recent growth. In the farm economy, dry weather hurt the winter wheat crop but recent rains should help soil moisture levels. Labor markets remained very tight, although wage pressures were not quite as high as in the recent past. Some retail prices edged up, and prices for several construction and manufacturing materials continued to rise.
Retail Sales
Retail activity remained strong following a very robust Christmas season, with most stores reporting higher sales than a year ago. Most managers expect the strong activity to continue through the spring. Sales of home furnishings, men's sportswear, and cosmetics were especially robust in January and early February. Winter clothing and men's formal wear experienced weak sales. E-commerce activity continued to expand, helping sales for several large retailers that have their own web sites. Merchants in some rural areas of the district, however, reported being negatively affected by online retailing. Changes in store inventories were similar to recent surveys, with nearly all managers satisfied with current stock levels. Motor vehicle sales declined somewhat in January and early February, dropping roughly to year-ago levels. Car dealers remained generally satisfied with vehicle inventories, although shortages of some models of trucks and SUVs were reported. Most dealers were optimistic about vehicle sales in coming months, despite recent increases in gasoline prices and interest rates.
Manufacturing
District factory activity remained solid, with most plants reporting high levels of capacity utilization. An exception was the food industry, which may have experienced some payback for consumer stockpiling heading into Y2K. Most manufacturing materials experienced few availability problems. Lead times for some materials, however, such as steel and electronic components, continued to edge up. Managers were generally satisfied with inventories in January and early February, although several plants reported plans to trim stock levels in coming months.
Housing
Housing starts were flat in January but still higher than a year ago. Most builders expect a normal seasonal increase in activity over the next few months. Concerns about availability continued to ease for several construction materials, including gypsum wallboard and concrete. Home sales slowed more than normal in January and were well below year-ago levels in most major cities in the district. Despite the recent slowdown in sales, inventories of unsold homes were quite low in most areas, placing some upward pressure on home prices. Mortgage demand remains much lower than a year ago, as refinancing activity has dropped off considerably.
Banking
Bankers reported that loans edged down and deposits were flat last month, slightly boosting loan-deposit ratios. Demand declined slightly for home mortgage loans, construction loans, and commercial real estate loans. Demand for agricultural loans edged up. On the deposit side, all major categories held steady. Almost all respondents increased their prime lending rates in the past month, and most raised their consumer lending rates as well. Most banks expect to leave their lending rates unchanged in the near future, but some expect to raise rates further. A few banks tightened credit standards.
Energy
District energy activity leveled off last month despite further increases in energy prices. The count of active oil and gas rigs in the district was stable in January and early February, remaining well above year-ago levels but below the previous peak in late 1997. Despite the almost year-long increase in drilling activity, oil and gas production has been restrained by uncertainty about future prices.
Agriculture
Dry weather this winter hurt the district's winter wheat crop, but recent rain in parts of the district should help soil moisture levels. Preliminary credit reviews indicate agricultural loan portfolios were in good condition. Most farm borrowers have been able to meet their debt obligations with the help of government payments, but some credit problems have emerged in areas where crop yields were down in 1999. Despite these problems, district bankers reported that only a few of their farm borrowers will be denied credit this year. Farmland values remained steady due to strong demand for farm real estate investment. Likewise, rental rates for farmland stayed healthy, despite low commodity prices.
Wages and Prices
Labor markets remained very tight, with reports of labor shortages similar to the recent past. Entry-level workers in most industries continued to be particularly difficult to find. Other positions experiencing shortages included clerical workers, engineers, computer specialists, and hourly sales workers. Wage pressures did not appear to be quite as high as in the latter half of 1999. Many employers expressed disappointment with the current pool of potential workers, and some said this has kept them from attempting to attract new workers with higher wages. Sizable wage pressures persisted, however, in sectors with a large potential for job-hopping, such as the retail and restaurant industries. An increasing number of small businesses appeared to be caught in a cost-price squeeze. Costs at these firms have been driven up due to recent wage increases, while selling prices have remained fairly steady. Some retail prices edged up in late January and early February but are expected to stabilize in coming months. Prices for several manufacturing materials, including synthetic rubber, chemicals, and solvents, moved higher and are expected to rise further due to recent increases in oil prices. Builders reported rising prices for some materials and expect continued price increases with the seasonal expansion in building activity.
|
Minneapolis