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July 23, 2008
Federal Reserve Districts
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The Ninth District economy grew slightly since the last report. Modest increases in activity were noted in tourism, mining and commercial real estate. Activity in manufacturing, commercial construction, agriculture and energy was mixed. Decreased activity was noted in services and residential construction and real estate, while consumer spending was sluggish. Overall labor markets softened slightly since the last report; nevertheless, some industries reported difficulty finding qualified workers. Wages increased moderately, while significant price increases were noted for fuel and energy; lumber prices were lower. Consumer Spending and Tourism An auto dealers association in Minnesota reported that new retail car and light truck registrations are expected to fall almost 4 percent in 2008 compared with 2007. A representative of the association noted that sales and traffic at dealerships were very slow in June across all types of vehicles. In contrast, an auto dealer in Montana said that sales were on par with a year ago for foreign cars with high fuel efficiency. Tourism activity increased. A bank director noted that recent visitor numbers were up Montana. Tourism officials in western South Dakota noted solid activity during the early part of the summer season. A Minnesota-based travel agent noted that leisure travel was still up, although some customers were electing to travel closer to home instead of going abroad. The number of international tourists traveling to Minnesota increased. Crossings of the International Bridge in Sault Ste. Marie in the Upper Peninsula of Michigan were up about 3 percent in June compared with a year ago. Services Construction and Real Estate Commercial real estate activity increased slightly. Contacts reported rent increases and positive absorption in the Minneapolis-St. Paul area office market. One of the region's largest office towers in downtown Minneapolis was put up for sale. However, the retail property sector remains weak throughout the District. The residential real estate market continued its slump. Pending home sales in Minneapolis-St. Paul were down more than 3 percent in June compared with a year earlier; average sale prices fell 12 percent. Reports indicated that home foreclosures recently increased in Rapid City, S.D. Manufacturing Energy and Mining Agriculture Employment, Wages and Prices In contrast, some custom manufacturers in Minnesota and the Upper Peninsula were concerned about attracting qualified workers to fill open positions. In North Dakota, difficulty finding qualified trades workers for jobs at coal operations is expected to increase during the next few years as more construction projects come online and retirements increase. Wage increases were moderate. Among respondents to a recent St. Cloud (Minn.) Area Business Outlook Survey, 35 percent expected employee compensation to increase over the next six months, down from 38 percent in last year's survey. Significant price increases were noted for fuel and energy; while lumber prices were lower. A number of fuel surcharges were being placed on top of transportation and some raw materials prices. Minnesota gasoline prices at the end of June were $1 per gallon more than a year ago. Recent jet fuel and diesel fuel prices were about 75 percent higher. Residential customers of a Montana natural gas utility were recently paying about 50 percent higher prices for natural gas compared with a year ago. In contrast, prices for lumber were down about 3 percent to 4 percent.
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