October 15, 2008
Federal Reserve Districts
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Ninth District economic activity slowed since the last report. Decreased activity was noted in consumer spending, construction and real estate, and agriculture. Manufacturing was mixed. Increases in activity were noted in tourism, services, and energy and mining. Labor markets weakened since the last report. Overall wage increases were moderate, while prices for some products decreased. Consumer Spending and Tourism. Consumer spending declined since the last report. September same-store sales at a major Minneapolis-based retailer were expected to have decreased 2 percent compared with a year ago. An apparel retailer based in Minnesota noted that recent slow mall traffic was hampering sales. Two restaurants and a coffee shop recently went out of business in St. Cloud, Minn. A representative of an auto dealers' association in Montana noted that vehicle sales have slowed, particularly among SUVs and trucks with lower gas mileage. In addition, some dealers noted that customers were having difficulty obtaining credit. A Minnesota auto dealer noted that September sales were down 20 percent from a year ago. In a late September e-mail survey of District business contacts, about half of retailers noted that sales decreased recently, while 30 percent reported increases.
In contrast, traffic at a Minneapolis area mall improved in August and September. A mall manager in Bismarck, N.D., reported solid sales in August and September. Retail sales were up in the Upper Peninsula of Michigan and Fargo, N.D., in part due to Canadian shoppers.
Tourism activity was up slightly from a year ago; however, spending was soft in some areas. A bank director noted that late summer and early fall tourism conditions in northern Minnesota were solid. A South Dakota tourism official reported that visits in September were up about 2 percent compared with a year ago, although camping and retail spending were soft. Restaurant and hotel usage in southwestern Montana were on par with last year, but overall tourism-related spending was lower. A Minnesota-based travel agency is expecting weak business through the rest of 2008 because of slow corporate and leisure travel.
Construction and Real Estate
Overall real estate activity was slower. Among industry respondents to the e-mail survey, 43 percent said recent sales were down and 14 percent said they increased, while 48 percent said credit was less available and none reported more credit availability. In contrast, a commercial broker in Bismarck, N.D., said the market for office and industrial space there remained strong. Residential real estate remained slow. Sales in most District markets were down. However, pending sales in the Twin Cities at the end of September were above year-earlier levels, and about level with two years ago.
Energy and Mining
Employment, Wages and Prices
Overall wage increases were moderate. A temporary work services agency noted that employee wages were stable. According to respondents to a recent St. Cloud (Minn.) Area Business Outlook Survey, 66 percent expect no change in employee compensation over the next six months.
Prices for some products decreased. Minnesota gasoline prices were down 55 cents per gallon from their peak in July, but were still 72 cents per gallon higher than a year ago. Prices for copper and aluminum decreased during the past month. A Minnesota restaurant owner noted that prices for beef, chicken and dairy were still at high levels. While health insurance rates were up about 6 percent compared with a year ago, the increase was smaller than the past few years. Winter heating bills in Minnesota are expected to increase 10 percent to 15 percent.