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Ninth District economic activity during September and early October was slow. Consumer spending was weak, and energy and commercial construction activity were down. Agriculture and mining were mixed, while manufacturing, residential construction and tourism grew. Over this period labor markets were soft. Overall, price and wage increases were modest, but significant price increases were noted in trucking and insurance.
Construction and Real Estate
Commercial construction was down. The value of contracts awarded for new construction projects in Minnesota and the Dakotas decreased 8 percent for the three-month period ending in August compared with last year. Representatives of commercial real estate firms said that recent leasing activity declined, with much sublease space available in the Minneapolis-St. Paul area, and sale prices for new office buildings are soft in Minneapolis-St. Paul compared with last year. Commercial and heavy construction in Montana was down from a year ago, according to a bank director. Recent commercial construction in the Fargo, N.D., area has been steady, although not as robust as a year ago, according to a member of a local economic development organization. However, solid buying activity was noted in the Minneapolis-St. Paul industrial market.
Activity in home building and residential real estate was solid. The number of planned units in the Minneapolis-St. Paul area was 26 percent higher in September compared with a year ago, primarily due to strong growth in multifamily housing projects. However, the vacancy rate for apartments in the Minneapolis-St. Paul area increased to 5.2 percent during the third quarter, up from 2.5 percent a year ago. A bank director reported strong recent home construction activity in southwest Montana; however, several construction firms noted reduced bidding activity for 2003 projects.
Consumer Spending and Tourism
Overall consumer spending was weak. A major Minneapolis-based department store retailer reported that overall same-store sales were down about 1 percent for September compared with a year ago. A food distributor and grocer in the Minneapolis area reported that shoppers are purchasing more low-cost grocery items compared with premium food products.
District mall managers reported soft sales for September. Traffic and sales at a Minneapolis area mall were down in the low single digits in September compared with a year ago. Another Minneapolis mall reported sales down about 5 percent in September from a year ago due to recent expanded local retailer competition. Sales at a North Dakota mall were down during the first week of September compared with a year ago; however, they rebounded during the rest of the month.
Recent auto sales were steady to down slightly from the previous report, according to representatives of auto dealer associations. In North Dakota, sales were steady in September, while in South Dakota a majority of dealers reported good September sales, but October started slow compared with late summer. Car and truck sales in the Minneapolis-St. Paul area were soft in September, but trucks were selling well in other parts of Minnesota.
Fall tourism activity was solid in several parts of the District. A South Dakota tourism official in the Black Hills area reported tourism-related visits and sales up 12 percent to 15 percent in September compared with a year ago. Visits to Mount Rushmore were on a record-setting pace. Fall tourism traffic and inquiries were on par with a year ago, according to a chamber of commerce official in northwestern Wisconsin. However, in the Upper Peninsula of Michigan, some tourism businesses predicted that the year will finish lower than 2001.
Manufacturing
Manufacturing activity was slightly up. A September survey of purchasing managers by Creighton University (Omaha, Neb.) indicated level manufacturing activity in Minnesota and some increased activity in the Dakotas. An early September survey of manufacturers in Minnesota, jointly conducted by the state Department of Trade and Economic Development and the Federal Reserve Bank of Minneapolis, revealed that manufacturers expect orders to increase in the second half of 2002 from the weak first half of the year. In North Dakota, a wind turbine blades manufacturer reported strong demand for its wind energy products, while a construction equipment manufacturer announced plans to shut down production for one week in October. In Minnesota, a maker of snowmobiles recently announced plans to expand a factory. However, a telecommunications plant in Minnesota is expected to close.
Energy and Mining
Activity in the energy sector declined, while the mining sector was mixed. Mid-October District oil and natural gas exploration and production levels were down from early September. Meanwhile, an iron nugget pilot plant in northern Minnesota received a $5 million boost from the U.S. Department of Energy. However, a large Montana platinum and palladium mine scaled back its production forecasts.
Agriculture
The agricultural economy was mixed. Livestock producers felt the negative effects from the drought and lower hog prices. Meanwhile, crop producers received firm prices, and Minnesota and North Dakota producers enjoyed healthy crops. The U.S. Department of Agriculture (USDA) rated 55 percent and 59 percent of the pasture feed rangeland in Montana and South Dakota, respectively, as poor or very poor. Meanwhile, the USDA estimated large sugar beet and dry edible bean harvests in Minnesota and North Dakota. The USDA rated 72 percent of the Minnesota corn and soybean crops as good or excellent. The USDA reported that preliminary September corn and wheat prices were up 8 percent and 12 percent, respectively, from August. However, the preliminary September price for hogs was down 17 percent from August.
Employment, Wages, and Prices
Labor markets loosened slightly since the last report due to layoffs. A major Minnesota-based airline recently called for as many as 1,600 flight attendants to go on voluntary leave for one month to a year and announced plans to lay off 63 pilots by February. A national trucking company went bankrupt, eliminating 260 drivers in Minnesota. A St. Paul-based computer software company recently announced plans to shed 234 jobs. A call center in Minnesota will likely close in December, affecting 200 jobs. A South Dakota sewing plant recently announced plans to shut down, affecting 45 employees. Employment levels in District states dropped for the 14th straight month in August.
In contrast, a national bank announced plans to add 120 full-time jobs at its St. Cloud, Minn., facility during the coming year. A retailer in Sioux Falls, S.D., plans to hire as many as 700 new employees during October for a new store.
Wage increases were moderate. Wages for District manufacturing workers increased less than 2 percent for the three-month period ending in August compared with a year ago, the smallest increase in over 10 years. A Minnesota city employees' union ratified a new contract that provides a 3 percent increase in pay each year for two years.
Increases in prices were also reported as moderate, with the exception of significant price increases in trucking and insurance. A Montana bank director noted modest increases in overall prices. Trucking rates recently increased about 6 percent to 8 percent from a month earlier, according to a representative of a major trucking company. In 2003, family health insurance costs will increase 20 percent and 38 percent, respectively, from 2002 at two large Minnesota companies.
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St. Louis