January 16, 2002
Federal Reserve Districts
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Economic activity in the Ninth District over recent months has been somewhat mixed. Commercial construction has slowed while residential construction is up slightly. While consumer spending has grown, manufacturing, agriculture, tourism, energy and mining are either mixed or down slightly. Meanwhile, from mid-November to early January, labor markets weakened and overall wages and prices are stable. However, decreases in heating costs and increases in health insurance rates were noted.
Construction and Real Estate
Residential construction and sales are up from a year earlier. Bank directors noted that recent homebuilding and home sales are solid in many parts of the district. Rochester, Minn., recorded the second-biggest November for the number of home permits issued. Home sales in Minneapolis-St. Paul were up 23 percent in November and housing permits issued were up 7 percent in December compared with a year earlier.
Consumer Spending and Tourism
However, a manager of a Minneapolis area mall reported sales were down 3 percent in December compared with a year earlier. A department store manager in Duluth, Minn., reported flat holiday sales compared with last year. Winter attire sales during the holidays were slow due to warm weather, according to a clothing store owner in Minnesota.
While auto sales were strong in October and November, a bank director noted that sales slowed during early December. An auto dealer association representative in Minnesota reported that sales of new cars were softer in December compared with the previous two months, while inventories of used cars were up due to a high number of trade-ins during October and November.
Low snowfall levels have decreased winter tourism in several areas. Snowmobile trails remained ungroomed as of early January in northwestern Wisconsin and several lodging establishments there reported lower revenues in December compared with past years. In contrast, a ski resort in northern Minnesota reported solid numbers of skiers in December, while January bookings are ahead of last year. A Montana ski resort reports strong activity due to favorable snow conditions in December; however, advanced bookings for the rest of the season are down compared with last year.
Mining and Energy
Employment, Wages, and Prices
Initial claims for unemployment insurance in Minnesota for the four-week period ending December 15 were up 38 percent compared with a year ago. According to results of the Minneapolis Fed's annual business conditions survey (conducted in November), only 15 percent of respondents expect employment levels to increase at their companies in 2002, down from 30 percent in last year's survey. However, several medical centers in the district continue to report difficulty filling positions for nurses.
Wage increases are modest. Only 5 percent of respondents to a survey of manufacturers in Minnesota, Wisconsin and the Dakotas reported increased wages in December compared with 48 percent a year ago. Wages for district manufacturing workers increased 2.2 percent for the three-month period ending in November compared with a year ago, the smallest year-over-year increase in almost three years. Bank directors expect wages to increase no more than 2 percent to 4 percent in 2002.
Price increases are moderate, with significant price decreases noted in winter heating and increases in health insurance rates. About 22 percent of respondents to a survey of manufacturers in Minnesota, Wisconsin and the Dakotas reported higher product prices in December, down from 40 percent a year ago. Recent natural gas prices for residential customers are down 35 percent to 50 percent in many parts of the district compared with last year. Bank directors reported significantly higher health insurance rates in their areas.