October 24, 2001
Federal Reserve Districts
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Economic activity in the Ninth District has weakened since Sept. 11. Tourism, commercial real estate, manufacturing, agriculture and mining are down, while residential real estate, consumer spending and energy activity are about even. Labor markets have been disrupted by major layoffs and a Minnesota state government employee strike. Overall wage and price increases are moderate, with the exception of higher health insurance costs and lower natural gas, gasoline and lumber prices.
Construction and Real Estate
Residential real estate activity is generally level. A representative of a realtors association in the Minneapolis area reported that since Sept. 11 buyers and sellers have returned to the market, but sales are at a slower pace than they were earlier this year. Price increases for homes have recently slowed, according to a mortgage broker. September building permits in the Minneapolis-St. Paul area were even with a year ago, said a builders association spokesperson. In Sioux Falls, S.D., a banker reported that real estate activity is still busy following Sept. 11. Officials in Rochester, Minn., noted a record number of new home starts during September.
Consumer Spending and Tourism
Auto dealers in Minnesota reported a gradual shift back to normal fall activity in both sales and service following a decline during the week after Sept. 11, according to a representative of the Minnesota auto dealers association. A North Dakota auto dealers association spokesperson noted strong sales from mid-September through early October after sluggish sales in early September, in large part due to zero percent financing.
Tourism businesses that rely on air service report lower levels of activity compared with a year ago. Total passengers at regional airports were down about 30 percent in September compared with last year. Hotel occupancy in the Minneapolis-St. Paul area dropped about 20 percent during the first two weeks following Sept. 11 compared with a year ago, caused in part by 11 convention cancellations. However, no conventions have canceled for October, and hotel occupancy showed signs of improvement by the beginning of October.
In contrast, driving destinations report steady activity. September tourism in northern Wisconsin was about the same as a year ago, according to chamber of commerce officials. Several tourism businesses and destinations in South Dakota reported normal activity during September. Chamber of commerce officials in northern Minnesota and Montana noted that higher security and longer wait times at Canadian border crossings have had a minimal effect on tourism. However, in the Upper Peninsula of Michigan crossings at the International Bridge at Sault Ste. Marie were off 24 percent in September compared with a year ago.
Mining and Energy
Employment, Wages, and Prices
Wage increases remain moderate. A temporary staffing agency in Minnesota reported no changes in wages since Sept. 11.
Overall price increases remain modest, with significant price increases expected in health insurance and decreases noted in natural gas, gasoline and lumber prices. Many businesses in South Dakota expect 20 percent increases in health insurance rates for 2002 compared to 2001, according to the state chamber of commerce. November futures prices for natural gas decreased 11 percent from Sept. 10 to Oct. 9, while prices for gasoline in Minnesota dropped 34 percent from Sept. 10 to Oct. 8. Lumber prices declined after Sept. 11, according to a lumber company owner. Almost 60 percent of respondents to the former director and advisory council survey expect no change in expenses for their company due to Sept. 11; 26 percent expect expenses to increase.