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The Ninth District economy grew moderately since the last report. Increases
in activity were noted in consumer spending, commercial real estate, tourism,
agriculture, mining, and energy. Meanwhile, manufacturing activity was mixed,
commercial construction was steady, and residential real estate and construction
activity decreased. Labor markets tightened since the last report, and wage
increases were moderate. Significant price increases were noted for some building
materials, and significant decreases were noted in fuel and lumber.
Consumer Spending and Tourism
Overall consumer spending increased modestly from a year ago. A major Minneapolis-based
retailer reported same-store sales up about 3 percent in August compared with
a year ago. A Minneapolis area mall manager noted that recent traffic was higher
than a year ago, but sales were relatively flat. A solid back-to-school shopping
season was reported at another Minneapolis area mall; recent traffic was up
2 percent. Cool weather helped boost sales for sweaters and light jackets. A
mall manager in Montana noted that sales were very strong in August compared
with a year ago.
An auto dealer in eastern Montana reported that sales were up slightly from
a year ago. A representative of an auto dealers association in North Dakota
noted that sales over the past two months were sluggish compared with last year.
Late summer and fall tourism activity was up slightly from last year. A Chamber
of Commerce representative in northwestern Wisconsin noted strong traffic during
a recent autumn event. The fall tourism season is starting to pick up in South
Dakota, according to an official; the pheasant hunting season looks promising.
A tourism official in the Upper Peninsula of Michigan noted positive reports
by tourism-related businesses during August and September. Some lodging operators
in northeastern Minnesota noted a slower August compared with last year.
Construction and Real Estate
Commercial construction activity was steady. A bank director noted that commercial
construction was active, although the pace of activity might be slowing. August
residential and commercial permits in Rochester, Minn., were down 22 percent
in value from a year ago. Developers announced plans for a $14.4 million industrial
park in suburban Minneapolis, and other developers announced plans for a $5.2
million, 55,000- square-foot fitness center in suburban St. Paul. However, residential
construction continued to weaken around the District. A Minneapolis director
heard contractors describe activity there as slow. A proposed condominium development
plan in St. Paul was delayed, and there is doubt about whether some downtown
Minneapolis condo developments will go forward. However, a western North Dakota
director described residential construction in his area as robust.
Residential real estate continued to slide. August home sales in Minneapolis-St.
Paul were down 27 percent from 2005, with pending sales down 23 percent. Sales
were down 10 percent from last year in the Upper Peninsula of Michigan; the
market for recreational land is the only strong segment there. However, a representative
of a Realtors' association in Sioux Falls, S. D. described the market there
as on pace with last year's record-breaking levels, with lower priced homes
driving the market. The commercial sector stayed strong, however, particularly
the Minneapolis industrial market, which saw rising prices, according to an
official from a commercial real estate firm. The markets for retail space in
North Dakota and Montana are strong. Office vacancies crept up in the Minneapolis
and St. Paul central business districts.
Growth in the manufacturing sector was mixed. An October survey of purchasing
managers by Creighton University (Omaha, Neb.) indicated slight growth of manufacturing
activity in the Dakotas and Minnesota. A contact from a specialty food products
company in North Dakota reported strong demand and was expanding workers' overtime
hours. In Minnesota, a contact from a manufacturer of parts for the medical
and transportation industries reported strong demand, added production, and
increased hiring. An industrial machine producer in northwestern Wisconsin noted
a slowing down in demand from domestic customers and increased demand from foreign
customers. However, due to weak residential construction, two oriented-strand
board plants suspended operations in Minnesota. A contact at a lumber mill in
northwestern Wisconsin reported sales are "real slow."
Energy and Mining
Activity in the energy and mining sectors increased since the last report. Although
oil and gas exploration and production in the District were stable, the alternative
energy industry, including wind, biodiesel, and ethanol, continued to expand
at a rapid pace. Mining production is at near-capacity across the District.
A Montana platinum mine reopened after shutting down due to nearby wildfires.
A Minnesota iron-mining official noted that "all systems are go," as production
is strong and new mines are in the permitting process.
Agricultural activity increased since the last report. Late summer rains and
improved harvest estimates aided farmers. District sugar beet producers are
expecting a bumper crop. The U.S. Department of Agriculture reported that corn
and soybean progress in District states is ahead of last year and the five-year
average. The corn harvest in Minnesota is expected to come in at a robust 1.1
billion bushels. However, District corn and soybean production is projected
to decrease from last year.
Employment, Wages and Prices
Labor markets tightened slightly since the last report. A temporary staffing
agency survey of Minneapolis-St. Paul companies showed that 36 percent of respondents
expect to increase staffing levels during the fourth quarter, while 11 percent
expect declines. A year ago, 26 percent expected increases, while 13 percent
anticipated decreases. More than half of the 149 employers in Minnesota surveyed
by St. Cloud State University's Career Service Center plan to hire new college
graduates this year. Construction of an anti-cancer-agent research facility
is under way in Minnesota, making room for 100 new research positions. In contrast,
a telecommunications company based in Minnesota plans to lay off 225 employees
Wage increases were moderate. Wages for manufacturing workers in District
states increased 1.8 percent for the three-month period ended in August compared
with a year ago. Workers at five hospitals in the Minneapolis-St. Paul area
recently agreed to a new contract that provides wage increases of 4 percent
in each of the first two years and 3 percent in the third, and employer contributions
to health insurance premiums will increase.
Significant price increases were noted in some building materials, and decreases
were noted in fuel and lumber. Prices for copper and brass mill shapes, steel
mill products, asphalt, and wire and cable were notably higher than a year earlier.
Meanwhile, gasoline prices decreased since the last report. In Minnesota, gasoline
prices toward the end of September were 49 cents per gallon lower than a year
ago and 75 cents lower than a month earlier. Regional prices for diesel fuel
were 23 cents per gallon lower than a year ago. Recent plywood and softwood
lumber prices were also down from last year.