|
Economic activity in the Ninth District increased slightly since the last report. Increases were noted in consumer spending, manufacturing, energy, and mining. Meanwhile, tourism, agriculture, and residential real estate and construction activity decreased. Labor markets continued to show signs of gradual tightening. Overall price increases were modest as a number of energy and materials prices moderated.
Consumer Spending and Tourism
Overall holiday sales increased slightly. A major Minneapolis-based retailer reported same-store sales up more than 4 percent in December compared with a year ago. December sales at a Minneapolis area mall were up about 3 percent to 5 percent from last year, while a manager at another Minneapolis area mall noted that most stores achieved their sales plans and that less merchandise was left over for clearance than in years past. A mall manager in Montana reported that sales at department stores were up, but sales at other stores in the mall were flat on balance compared with last year. December sales at another Montana mall were likely even to up slightly from last year; spending on gift card sales and gift wrap services was up substantially from a year ago. Two major Minnesota-based retailers reported that holiday online sales were up 50 percent compared with a year ago.
Overall vehicle sales were down slightly during November and December in Montana, with SUVs showing the weakest sales and import cars the strongest, according to a representative of an auto dealers association. Vehicle sales were down in South Dakota during the past two months.
In many parts of the District, winter tourism activity was in the doldrums. While making snow has allowed ski hills to open in the Black Hills of South Dakota, overall tourism activity in the area is down substantially from a year ago due to a lack of snow for snowmobiling. Unseasonably warm weather and a lack of snow in northern Minnesota and Wisconsin and the Upper Peninsula of Michigan substantially slowed tourism activity during December.
Construction and Real Estate
Commercial construction continued at a brisk pace. Directors in Bozeman, Mont., and Sioux Falls, S.D., said they expect commercial construction to be solid in 2007. December commercial permits were up in value from year-earlier levels in Rochester, Minn., largely from retail building. A large electric power cooperative plans to build a $51-million, 160,000-square-foot headquarters in suburban Minneapolis, with a possible larger second phase, and a medical devices company is adding 110,000 square feet of space. New residential construction was weak, while higher home remodeling activity was reported in several markets, including Rochester and Sioux Falls. A representative of a homebuilders' association in Minneapolis-St. Paul said that although new construction was down significantly for the year, many contractors have focused on remodeling because of strong activity.
Commercial real estate was solid. A number of large transactions took place in Minnesota at the end of 2006, including the $100-million sale of an office building in downtown St. Paul. According to a commercial Realtor in Fargo, N.D., downtown office vacancy decreased nearly 50 percent from the beginning of 2006, with healthy absorption in the suburban office market; however, newly developed strip-mall retail space is about 20 percent vacant. Meanwhile, residential real estate continued to slide. Bankers and builders in Bozeman characterized the residential real estate market there as oversupplied. While there is still a very high inventory of unsold homes in Minneapolis-St. Paul, in late December it stood at its lowest level since February.
Manufacturing
Activity in the manufacturing sector grew slightly since the last report. A December survey of purchasing managers by Creighton University (Omaha, Neb.) indicated flat manufacturing activity in South Dakota and Minnesota and increased activity in North Dakota. In Montana, a home-production company is building a new facility and a polyethylene pipe manufacturer is expanding a production facility. In Minnesota, a truck parts producer and a boat factory are expanding capacity. In South Dakota, a plastic injection moldings maker is building a new plant, a new bridge component manufacturing plant is planned, and two farm equipment producers are expanding manufacturing facilities. A wind turbine blade company plans to expand production capacity in North Dakota.
Energy and Mining
Activity in the energy and mining sectors grew since the last report. Oil and gas exploration in the District increased from previously reported amounts. In addition, newly announced wind and ethanol projects are planned. Mining production remained at near capacity across the District. Even though the price of copper decreased, a Montana mining official noted that mining activity was "up a little" since the last report.
Agriculture
Agricultural activity decreased since the last report. Dry conditions worsened as the United States Drought Monitor revealed that almost the whole District is either in drought or abnormally dry. In the Dakotas, dry edible bean production in 2006 was down significantly from 2005.
Employment, Wages and Prices
Labor markets continued to show signs of gradual tightening. A call center recently announced plans to hire up to 400 employees, and a home-improvement retailer plans to hire 175 workers in South Dakota. A Minnesota company that supports management software recently announced intentions to hire 225 employees over the next two years. Some Minnesota companies noted difficulty finding nurses, accountants, long-haul truckers, engineers, and workers skilled in precision manufacturing. A recent poll conducted by the Minnesota Chamber of Commerce showed that 52 percent of respondents expect to hire in 2007, down from 55 percent in last year's poll.
In contrast, a temporary staffing agency survey of Minneapolis-St. Paul businesses revealed that 18 percent of respondents expect to hire workers during the first quarter, while 28 percent expect declines. These results indicated softer hiring relative to a year ago when 29 percent expected increased hiring and 9 percent anticipated decreases. A manufacturer recently announced plans to eliminate over 400 jobs in Minnesota as part of a restructuring plan. A residential window manufacturer laid off 440 Minnesota and Wisconsin workers in December.
While overall growth in wages was moderate, wage pressure was noted in some areas. A bank director in southwestern Montana reported that some salaries were rising in order to attract employees. City park and recreation programs in Aberdeen, S.D., have raised wages in order to ameliorate difficulty finding workers. A union for Minneapolis-St. Paul office building janitors was recently considering a strike due to differences with employers on health care benefits.
Overall price increases were modest as a number of energy and materials prices moderated. Minnesota gasoline prices in the beginning of January were about the same as they were in mid-November and a year ago. Natural gas prices are lower than a year ago. While recent copper prices were much higher than a year ago, they decreased during the past few months.
|
St. Louis