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Overall economic activity in the Ninth District grew modestly during March and early April. Residential construction activity is strong, while consumer spending, tourism, manufacturing and mining are up slightly. Meanwhile, the energy sector is level, and commercial construction and agriculture are down. From early March to early April, labor markets loosened somewhat as previously announced layoffs took effect, while overall wages and prices were stable. However, price increases in gasoline, property insurance premiums and steel were noted.
Construction and Real Estate
Commercial construction is down somewhat, but builders are cautiously optimistic about upcoming activity. Contracts awarded for heavy construction projects in Minnesota and the Dakotas decreased 15 percent during the three-month period ending in February compared with last year. However, the state of Minnesota plans to spend a record amount on summer road construction projects. A commercial real estate firm representative noted that leasing activity was slower in February and March compared with a year ago in the Minneapolis-St. Paul area, but buying has been active due to low interest rates. While the dollar value of permits year to date through February is down compared with a year ago in Sioux Falls, S.D., builders are expecting a "good as ever" second half of the year, according to a city official.
District home building is solid. Housing units authorized were up 28 percent for the three-month period ending in February compared with a year earlier. In Minneapolis-St. Paul, planned units in March were up 8 percent from a year ago due to strength in the multifamily sector. A home-remodeling store in the Minneapolis area reported strong sales in February and March. A builders association representative in the Upper Peninsula of Michigan expects a good construction season, slightly ahead of last year.
Consumer Spending and Tourism
Consumer spending is up slightly from a year ago. A major Minneapolis-based department store retailer reported that overall same-store sales in March were almost 7 percent higher compared with a year earlier. A manager of a Montana mall said same-store sales were 3 percent higher in February compared with last year. A mall manager in the Minneapolis area reported generally solid traffic and sales during March compared with a year ago, but slow sales for higher-end merchandise. Two other Minneapolis area malls reported that recent sales were somewhat softer than last year.
Auto sales at two Minnesota dealers picked up in March from January and February levels, according to a bank director. More interest than expected from would-be buyers was reported at a recent auto show in Minneapolis-St. Paul. Steady auto sales were reported in North Dakota, according to an auto dealer representative.
Early spring tourism is up slightly in several areas and tourism officials are optimistic for the summer. The World Curling Championships brought thousands of people to Bismarck, N.D., in April. Businesses in northwestern Wisconsin that rely on skiing and snowmobiling noted improvement during a snowy March compared with January and February. Recent tourism activity in the Upper Peninsula was slightly higher than a year ago; meanwhile, summer reservations at resorts and campgrounds are ahead of last year.
Manufacturing
Manufacturing activity is up slightly. A March survey of purchasing managers by Creighton University indicated robust increases in manufacturing activity in the Dakotas and small decreases in Minnesota. In North Dakota, an ethanol producer plans to add a manufacturing facility. In South Dakota, a company that manufactures automotive air and oil filters is currently expanding capacity. A paper mill in Minnesota will close; however, a military supply manufacturer in Minnesota reported strong recent order volume and is optimistic about the near future. A plastic manufacturer is expanding capacity at a western Wisconsin facility. A metal fabricator is constructing a facility in the Upper Peninsula. Due to strong demand, a Montana lumber company recently completed a major expansion to a board plant, according to a Montana bank director.
Mining and Energy
Activity in the energy sector is level, while increases are noted in the mining sector. Late-March district oil and natural gas exploration and production levels were about even with the levels of mid-February. Meanwhile, the iron ore industry is expanding, as a mine in the Upper Peninsula recently reopened after a three-month shutdown and a taconite plant in northern Minnesota restarted after a four-week shutdown. In addition, an experimental iron nugget plant is planned for northern Minnesota. Meanwhile, recent Montana mining activity is about even with January and February levels, according to a state official.
Agriculture
Early spring snowstorms somewhat aided ground moisture but stressed livestock producers. The storms were not enough to help the winter wheat crop in Montana, as the U.S. Department of Agriculture (USDA) reported that nearly two-thirds of the crop was rated as "very poor" or "poor" and declared Montana a drought disaster area. Although the majority of calving and lambing is complete, the USDA reports that the snow and cold conditions made calving and lambing a little difficult, with some deaths reported.
Employment, Wages, and Prices
Labor markets loosened slightly as previously announced layoffs took effect. An Internet and catalog retail distributor laid off 2,400 workers in Minnesota. The closing of an abrasives manufacturing plant will result in 300 layoffs in the St. Paul area. The recent announcement of a paper mill closing in Minnesota will produce 616 layoffs. At a recent job fair in Sioux Falls, the number of job-seekers was up from previous years, while the number of employers with open positions appeared to be down. Initial claims for unemployment insurance benefits in Minnesota were 11 percent higher in March than a year earlier.
However, a few companies plan to increase hiring. A major Minnesota-based airline announced plans to permanently add 500 ground-worker jobs after laying off 9,600 employees companywide following Sept. 11. Recent plans for new a light assembly and distribution site in northwestern Wisconsin is expected to add 300 new jobs by 2005. In Duluth, Minn., a health insurance company will hire 120 employees by year's end. According to a recent survey of manufacturers in Minnesota, 22 percent of respondents expect employment to increase at their firm during the first half of 2002 from second half of 2001 levels; up from 6 percent six months ago.
Overall wage increases are moderate. Hourly wages for district manufacturing workers increased at an annual rate of 3.1 percent for the three-month period ending in February. Average wages and employee benefits for grocery workers in the St. Paul area will increase 12 percent over the next three years, according to a tentative contract agreement.
Overall price increases are also moderate, but significant hikes are noted in gasoline, property insurance and steel. Nearly two-thirds of the respondents to the survey of manufacturers in Minnesota expect prices to be level in the first half of 2002. As of April 8, gasoline prices increased about 20 cents in Minnesota from a month earlier. Homeowners in Minnesota have noted increases in insurance premiums, ranging from 6 percent to 22 percent compared with a year earlier. Hot-rolled steel prices have increased about 20 percent from three months ago.
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St. Louis