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The district economy continued to grow moderately during the
past month. Retail sales increased, manufacturing and construction activity remained
fairly strong, and energy activity improved somewhat. In the farm economy, an excellent
harvest has brightened income prospects for crop producers, and higher cattle prices have
restored profits to cattle feeders. Labor markets remained tight in much of the district,
prompting a number of firms to increase wages. Prices rose for some materials used in
manufacturing and construction. At the retail level, prices generally held steady.
Retail Sales
Retailers report sales increased last month and were
moderately higher than a year ago. Sales of apparel and electronics were brisk. Most
retailers expect a strong Christmas season even though the late Thanksgiving may hurt
sales somewhat. Retailers were generally satisfied with their inventory levels.
Automobile dealers report sales were unchanged last month and expect sales to increase
somewhat the rest of the year. Dealers have been expanding inventories, and some still
do not have as many light trucks and sport utility vehicles as they would like.
Manufacturing
Manufacturers continued to operate last month at
moderately high levels of capacity. Manufacturing materials were generally available,
with lead times either holding steady or declining. Most manufacturers were satisfied
with their inventory levels. A quarterly survey of district manufacturers indicated that
production, shipments, and new orders all increased modestly from September to October.
Housing
Builders report housing starts
slowed last month yet remained higher than
a year ago. Starts of both single-family
homes and multifamily units declined.
Builders expect little change in construction
activity, except for the normal seasonal
slowdown toward the end of the year. Sales
of new homes also fell last month. Most
building materials were readily available,
and delivery times were normal. Mortgage
lenders report slightly higher demand last
month and expect little change the rest of the
year.
Banking
Bankers report that loans
remained unchanged and deposits edged up
last month, slightly reducing loan-to-deposit
ratios. Home mortgage loans, home equity
loans, and commercial real estate loans
edged up, while residential construction
loans fell slightly. Demand deposits, NOW
accounts, and money market deposit
accounts all rose slightly, outweighing
declines in large CDs and small time and
savings deposits.
All respondent banks held their
prime lending rates steady last month and
expect to leave rates unchanged in the near
term. Banks also held their consumer
lending rates steady and plan no changes in
the near future. A greater fraction of banks
than in past months tightened their lending
standards.
Energy
District energy activity
improved somewhat last month, helped by
higher prices for oil and natural gas. The
district rig count rose 2.4 percent in October
and was above its year-ago level.
Agriculture
District farmers are just
completing an excellent fall harvest,
including the largest district corn crop in a
decade. The newly planted winter wheat
crop is in very good condition and should
provide plenty of wheat pasture for cattle, in
sharp contrast with a year ago when there
was virtually none. Prices for fed cattle
have jumped well above breakeven levels
recently due to a seasonal decline in beef
supplies. The higher prices brought a huge
inflow of cattle into district feedlots during
the past two months. Many industry analysts expect
prices to soften when the cattle now in
feedlots are slaughtered early next year. In
contrast to cattle feeders, ranchers were
still posting losses and continued to reduce
the size of their herds.
The bumper harvest and record grain
prices earlier in the year have improved the
overall quality of farm loan portfolios at
district banks. The quality of some cattle
loans has declined somewhat after sizable
losses in the cattle industry. Most cattle
producers still have strong balance sheets,
however, and an uptick in the demand for
feeder cattle loans suggests producers are
gearing up to take advantage of the recent
increase in cattle prices.
Wages and Prices
Labor markets were still
tight last month, and there was some
continued evidence of wage pressures.
Manufacturers report skilled and unskilled
workers remained in short supply, and a
number of companies say they have
responded by increasing wages. Prices held
steady at the retail level and rose for some
manufacturing and construction materials.
Retailers expect no major price changes in
coming months.
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Minneapolis