July 30, 2003
Federal Reserve Districts
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Ninth District economic activity was up slightly in June and early July. The residential real estate, consumer spending, manufacturing, energy and agriculture sectors grew, and tourism was flat. Meanwhile, commercial building and mining were down slightly, and labor markets were mixed. Overall wage and price increases were modest; however, significant price increases were noted in health care insurance, natural gas and fertilizer.
Construction and Real Estate
Increased commercial building activity was noted outside the Minneapolis-St. Paul area. Construction of the first new office building in about 10 years is under way in downtown Billings, Mont.; renovations and new loft apartment projects are also strong, according to a bank director. The value of permits for commercial construction projects for the first half of 2003 reached $41.2 million in Sioux Falls, S.D., up from $17.5 million during the same period a year ago, according to a city official. A bank director noted a recent increase in health care facility construction in southwestern Wisconsin.
Home building and residential real estate activity were strong. The number of permits for residential buildings was up 9 percent in June compared with a year ago in the Minneapolis-St. Paul area. The total value and the number of home sales both set records in June in Minneapolis-St. Paul; a realty association representative expects home sales to be up almost 5 percent in 2003 compared with a year earlier. The median home sale price for the Minneapolis-St. Paul area was up 6.7 percent in June compared with last year. Housing units authorized were up 12 percent compared with a year ago in Sioux Falls, S.D.
Consumer Spending and Tourism
While auto sales levels were up during the past few months compared with last year, sales have recently faced increased price competition, according to a Minnesota auto dealer.
Tourism conditions were flat. After a slow start in June, tourism activity in the Upper Peninsula in July was about the same as a year ago; softness was attributed to decreases in gift shop purchases, according to an official. Overall occupancy at large resorts and hotels during June was down from a year ago in northwestern Wisconsin, but the number of repeat visitors to small and medium-sized resorts was strong. In Minnesota, 26 percent of resorts and lodging facilities responding to a state survey expect occupancy to be up in July and August compared with last year; 37 percent expect occupancy to drop.
Energy and Mining
Employment, Wages, and Prices
In contrast, a medical technology firm announced plans to add an estimated 1,000 jobs in Minnesota. In the Bozeman, Mont., area, employment is expected to be at least steady to growing during the rest of 2003, according to a bank director. Furthermore, recent surveys point toward modest increases in overall employment. A June survey by the Minneapolis Fed of 4,400 Minnesota businesses showed that 27 percent of respondents expect to increase employment during the next six months, while 16 percent anticipate decreases. According to a survey of employers in Minnesota conducted by a staffing agency, 19 percent of respondents expect to increase employment levels in the third quarter, 12 percent anticipate decreases, and 61 percent expect no change. In the Upper Peninsula, more construction firms (62 percent vs. 38 percent) and manufacturing firms (74 percent vs. 26 percent) expect to increase employment rather than decrease employment, according to a recent survey by Northern Michigan University.
Wage increases were moderate. The Minneapolis Fed survey of Minnesota businesses showed that 86 percent of respondents expect to keep wage increases at 3 percent or lower.
Overall price increases were modest, except for significant increases in health insurance rates, natural gas and fertilizer. Several bank directors noted that prices are generally stable. South Dakota's chapter of the National Federation of Independent Businesses reported that one of four members that provide health insurance for their workers saw recent rate increases of 20 percent or more over last year. Due to increases in natural gas prices, heating bills in the Minneapolis-St. Paul area may be as much as 25 percent higher than last year. A bank director noted significant increases in fertilizer prices.