The Ninth District experienced broad-based growth from October through mid-November.
Signs of growth were noted in most areas: consumer spending, manufacturing,
construction, energy, mining and agriculture. Tourism was about even with a
year ago. Labor markets tightened and wage increases were modest. Price increases
appeared in a number of sectors including manufacturing, construction and energy.
Consumer Spending and Tourism
Overall consumer spending increased from a year ago. A major Minneapolis-based
retailer reported same-store sales up 6 percent in October compared with a year
ago, while a Minnesota-based women's apparel chain reported October same-store
sales up 7 percent compared with last year. A mall manager in Montana reported
sales up about 3 percent compared with a year ago; foot traffic picked up in
the first half of November. A Minneapolis area mall manager expects a 4 percent
to 5 percent increase in holiday sales compared with last year. A South Dakota
bank director said most businesses are optimistic for holiday sales.
An auto dealer in Minnesota reported that October was generally slow for traffic
and sales compared with a year ago; November started a little stronger.
Autumn tourism activity was about even with a year ago. The number of visitors
at tourism destinations in the Black Hills of South Dakota during September
and October was down slightly compared with a year ago; however, revenue was
up slightly. Fall outdoor activities were strong in northwestern Wisconsin,
although retail sales slowed somewhat, according to a chamber of commerce representative.
Manufacturing activity increased. Based on preliminary results from the Minneapolis
Fed's annual business poll (November), respondents from the manufacturing sector
expect strong growth in company sales, employment and investment in 2005. In
addition, an October survey of purchasing managers by Creighton University (Omaha,
Neb.) indicated strong manufacturing activity in the Dakotas and Minnesota.
A cabinet producer in Minnesota plans to add a warehouse and a finishing facility.
In South Dakota, a snowplow maker expanded production. A large North Dakota
bakery plans to add $2 million in processing equipment. In northwestern Wisconsin,
a food processor is planning to add a production facility.
Construction and Real Estate
Signs of growth were noted in commercial construction and real estate. In the
Minneapolis-St. Paul area, a large commercial real estate firm recently reported
increased absorption and decreased vacancy rates for office space. The medical
office market is heating up. The industrial real estate market continues to
improve throughout the district. Construction began on a $42 million beef processing
plant in South Dakota. Contracts awarded for large construction projects in
Minnesota and the Dakotas increased 17 percent for the three-month period ended
in September compared with a year ago.
Residential markets continued at a strong pace. A mortgage broker in Fargo-Moorhead
reported she expects another record year. Despite some small corrections in
the Minneapolis-St. Paul area--longer market times, higher inventory and fewer
closings--sales continue at a strong pace. A Minnesota bank director noted residential
construction was strong, with a mixed outlook. However, realtors in the Duluth-Superior
area noted movements toward a buyer's market.
Energy and Mining
Activity in the energy sectors remained strong, and mining activity increased.
Mid-November district oil production increased from early October. A Montana
gas exploration and pipeline company is having trouble finding qualified workers,
and another gas exploration company plans to increase the number of wells drilled.
Iron ore mines continued to produce at capacity. In addition, capital expansion
is under way. In Montana, a bank director noted that mining companies are investing
in capital equipment and are becoming more aggressive in production and expansion.
Agriculture activity increased. "Steadily going up," wrote a Montana lender
responding to the Minneapolis Fed's third quarter (October) agricultural credit
conditions survey. Lenders expected that overall agricultural income would rise
in the fourth quarter. The U.S. Department of Agriculture increased estimates
of the already high forecast for the corn harvest, and the soybean harvest is
expected to be above last year's levels. The Montana winter wheat crop has emerged
at a slightly faster pace than the five-year average. Meanwhile, the USDA forecasts
slight decreases in prices for corn and soybeans and a slight increase in wheat
Employment, Wages and Prices
Labor market conditions showed some signs of tightening since the last report.
A major Minnesota-based airline may recall as many as 400 pilots next year due
to attrition and modest growth. A North Dakota window plant recently announced
the addition of 40 new jobs. Retail hiring is generally expected to be above
year-ago levels at district retail stores. Montana and South Dakota business
contacts mentioned some difficulty in finding qualified workers, especially
skilled workers and in hiring for night and weekend shifts. Just over 44 percent
of preliminary respondents to the Minneapolis Fed's business poll expect to
increase employment at their companies; 49 percent expect to keep staffing levels
the same. A year ago the poll responses were 33 percent and 52 percent, respectively.
In contrast, a Minnesota-based company that makes recordable tape, CD and DVD
products plans to cut 250 jobs companywide, with many of the layoffs taking
place at its headquarters. The closing of a Minnesota call center, due to company
consolidation, will affect 70 jobs.
Increases in wages and salaries were modest. Bank directors in Montana mentioned
moderate increases in wages and salaries in several parts of the state. Wage
and salary growth in 2005 is expected to be subdued; 78 percent of respondents
to the Minneapolis Fed's business poll expect wage increases to range from 2
percent to 3 percent.
Price increases appeared in several sectors, including manufacturing, construction
and energy. Preliminary results of the Minneapolis Fed's business poll indicate
some higher expectations for prices, as 48 percent of respondents expect to
increase prices for their products in 2005, up from 31 percent in last year's
poll. Several construction and manufacturing materials prices increased, such
as aluminum, concrete, copper, diesel fuel and steel products. Softwood prices
decreased since the last report, but were still about 15 percent higher than
a year ago. Pork prices were up about 15 percent from last year.