December 3, 1997
Federal Reserve Districts
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As 1997 draws to a close, the Ninth District economy continues to enjoy robust, broad-based economic growth. Retail sales are strong, many manufacturers report full order books, and gas and oil development is at a high for the decade. While construction has cooled from the spirited pace seen earlier in the year, building activity remains at a high level. Crop yields and harvesting weather were generally favorable to farmers, and the financial condition of previously hard pressed ranchers continues to improve. There are few indications of price increases at any level.
On the negative side, tourism firms continue to report somewhat disappointing business. Wage pressures are reported in virtually all sectors and in most geographic areas. Finding qualified workers is a near-universal problem for employers.
Manufacturing and Business Services
Construction and Real Estate
Natural Resource Industries
After more than two years in the doldrums because of low cattle prices, farm income, spending and loan repayment rates have climbed to near normal levels in the western Dakotas and in Montana. One negative note, severe plant disease problems combined with low prices have been a blow to small grain producers in eastern North Dakota, where bankers say incomes and spending are down notably. While cattle production continues above year-ago levels, veterinarians in parts of the Dakotas touched by severe cold last winter report unusually high rates of beef cows that did not conceive this season, a lingering reaction to stress suffered earlier in the year.
Despite high loan-to-deposit ratios, most banks that responded to the Minneapolis Fed third quarter survey of agricultural credit conditions had adequate supplies of loanable funds. Interest rates on most types of loans fell 20 to 50 basis points, to their lowest levels in two years.
Consumer Spending and Tourism
Auto sales show moderate strength, according to registration numbers and reports from dealers association spokespersons. A businessman from northeastern Montana noted that improved cattle prices are resulting in strong demand for pickups, as ranchers make long-deferred replacements of their vehicles. As in general merchandise, structural change in auto retailing is accentuating competitive pressures for smaller independent dealers, particularly those in small towns. But sources in the sector are generally optimistic in their outlook for 1998.
Tourism is the weakest component of consumer spending. Reports are mixed, with some resorts in Minnesota and Wisconsin reporting moderate to good fall business. But visits to major tourist destinations in the Dakotas and Montana were disappointing overall. Good weather and ample game in key hunting areas is one bright spot.
Employment, Wages and Prices
Reports of product price increases are less common than those of decreases. Propane for heating and crop drying is in better supply than last year, and dealers expect lower prices. Some manufacturers report price drops for general and some specialty grades of steel. Those who manufacture components for other firms also report continuing pressure to lower their prices and are doing so through increased productivity.