June 11, 2003
Federal Reserve Districts
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Ninth District economic activity increased slightly in late April and May. The residential real estate, manufacturing, consumer spending, energy, and agriculture sectors grew. Meanwhile, commercial real estate and mining were down, and tourism and labor markets were mixed. Overall wage and price increases were modest. Significant price increases were noted in insurance, gasoline, and tuition.
Construction and Real Estate
Homebuilding and residential real estate activity were solid. A homebuilder in Bismarck, North Dakota, noted that recent building activity was higher than a year ago. April home sales were up 8.7 percent compared with a year ago in the Minneapolis-St. Paul area. A real estate firm reported strong residential sales in Missoula, Montana. An advisory council member from the Upper Peninsula of Michigan expects sales of his manufacturing firm's bathroom fixtures to increase 5 percent for the first half of 2003 because of strength in residential homebuilding and remodeling. However, a real estate firm expects fewer permits for multiunit housing in 2003 compared with 2002 for the Minneapolis-St. Paul area, as the vacancy rate for apartments is predicted to reach 7.4 percent by year-end, up from 5.6 percent in 2002.
Consumer Spending and Tourism
In contrast, another mall manager in Montana reported that April sales were down about 3 percent from a year ago, and May will also finish with a decrease, as shoppers spent more on clothing but less on gifts. Indicating soft consumer confidence, a recent University of North Dakota survey showed that 54 percent of residents in a forty-mile radius of Grand Forks expect that they will do worse financially over the next year, while 36 percent expect to do better.
Recent auto sales were solid in North Dakota, according to a representative of an auto dealers association.
Spring tourism activity was soft, but the outlook for the summer season is positive. An official in South Dakota reported tourism activity down about 12 percent in April but noted strong business on Memorial Day weekend. A tourism official in northwestern Wisconsin expects a solid summer season. Upper Peninsula tourism activity in May was about the same as last year, according to an official; inquiries for the summer activity were reported down during March and April, but they picked up since mid-May. However, a major airline based in Minnesota reported that it flew 5.5 percent fewer passengers in April compared with a year ago.
Energy and Mining
Employment, Wages, and Prices
In contrast, a commercial cleaning and sanitizing company expects to add at least 150 jobs in downtown St. Paul over the next three years. A financial services company recently announced plans to add about forty sales staff in the Minneapolis-St. Paul area. An advisory council member expects that the demand for labor in the construction trades in the Minneapolis-St. Paul area will increase slowly into the summer.
Wage increases were modest. According to a recent survey by the Quarterly Business Report in St. Cloud, Minnesota, 53 percent of respondents expect to increase employment compensation over the next six months. In last year's survey, 61 percent of respondents anticipated increases in compensation. Hired agricultural workers surveyed in April in Minnesota, Wisconsin, and Michigan earned about the same level of wages as a year ago.
Overall price increases were modest, except for significant increases in insurance, gasoline, and tuition. Only 30 percent of respondents to the Quarterly Business Report survey in St. Cloud expect to increase prices over the next six months, down from 45 percent in last year's survey. An advisory council member reported that recent health insurance prices rose 25 percent from a year ago. As of May 19, Minnesota gasoline prices were up 9 percent compared with the same week a year earlier. Plans to raise tuition were reported by several colleges and universities in the District. For example, tuition will increase up to 19 percent at Michigan Tech University in Houghton, Michigan.