The Federal Reserve Board eagle logo links to home page

Beige Book logo links to Beige Book home page for year currently displayed July 27, 2005

Federal Reserve Districts

Ninth District--Minneapolis

Skip to content

New York
St. Louis
Kansas City
San Francisco

Full report

The Ninth District economy displayed solid growth since the last report. Growth was evident in consumer spending, manufacturing, real estate, construction, tourism, agriculture, energy, and mining. Employment growth was evident since the last report, and contacts report difficulty finding skilled workers. Meanwhile, wages grew moderately. Significant price increases were noted in fuel and certain construction materials.

Consumer Spending and Tourism
Consumer spending showed solid growth. A major Minneapolis-based retailer reported same-store sales up 9 percent in June compared with a year ago. Sales were up between 5 percent and 10 percent from a year ago at a mall in North Dakota, and the first week in July was "huge," according to the mall manager. Recent apparel sales were described as outstanding at a mall in Montana. A Minneapolis-St. Paul area mall manager reported sales and traffic were up in the single digits for June compared with a year ago.

During the past couple of months, import car sales were about even with a year ago in Minnesota, while domestic brand sales were down. However, during the past few weeks, price discounts have helped boost domestic brand sales, according to a Minnesota auto dealer. New incentives also aided sales in North Dakota, according to a representative of an auto dealers association.

Summer tourism picked up by early July. In South Dakota, tourism activity started slowly in early June, but showed strength by early July, including strong attendance at Mt. Rushmore on the Fourth of July, according to a tourism official. Some resort owners and retailers in northwestern Wisconsin said they had the best Fourth of July weekend yet. A Montana tourism official said the summer tourism season so far has been good and is expected to continue. In Minnesota, tourism in June was steady or showing slow growth compared with last year, according to an official. Business travel is growing after several years of decreases, a particular boost to Minneapolis-St. Paul area hospitality businesses.

Construction and Real Estate
Overall, construction grew since the last report. In June, housing units authorized were up 5 percent for the Minneapolis-St. Paul area from a year earlier, which indicated a recent spike after a slow start to the year's building season. The value of newly permitted residential and commercial construction projects in Rochester, Minn., was up significantly in June from last year; however, the number of permits issued was down 12 percent from last year. Bank directors from North Dakota and Montana described residential and commercial construction as busy.

Real estate showed signs of increased activity. Commercial markets were picking up. Office and industrial sales for 2005 in the Minneapolis-St. Paul area are forecast to reach $1.4 billion, compared to $1.2 billion for last year. Office vacancy declined throughout Minneapolis-St. Paul, with industrial absorption at its highest levels since 2000. Developers in Marquette, Mich., reported that commercial and retail vacancy rates were down dramatically. Residential real estate markets were solid. There is practically no inventory in the parts of Montana and North Dakota experiencing an oil boom. Bank directors from North Dakota and Montana reported home prices up by 8 percent to 10 percent, with increases as high as 20 percent in oil-rich areas. June home sales in Minneapolis-St. Paul were down 4.4 percent from last year, but remained at a high level with prices up 5 percent and pending home sales up 3.2 percent.

Manufacturing activity expanded. A June survey of purchasing managers by Creighton University (Omaha, Neb.) indicated increased manufacturing activity in Minnesota and the Dakotas. In northern Minnesota, a paper mill and a metal processing plant are planning to expand. In western Wisconsin, a furnace company plans to build a new production facility. However, a foundry in North Dakota recently shut down and a maker of semiconductor testing machines in Minnesota plans to reduce production.

Energy and Mining
Activity in the energy sector was up slightly, and increased in the mining sector. A refinery in Montana plans to invest $325 million to upgrade its facilities. Several wind energy farms and three ethanol plants are under construction in district states. Oil and gas exploration and production were about level from early June through early July. Mines across the district are producing at near full capacity, and maintenance activity is occurring without the usual complete shutdowns. Expansions at several mines are in the permitting stage, and exploration activity is in full swing across the district.

Economic activity in the agricultural sector increased. Warm, dry weather aided crop development in the district. Yields and production for the South Dakota winter wheat crop are up from a year ago. In Montana, 84 percent of the winter wheat crop is rated good to excellent, significantly above the five-year average of 36 percent. Row crop progress increased rapidly during the first half of July. The U.S. Department of Agriculture projects corn prices in 2005/06 to average $1.70 to $2.10, up 15 cents on each end from last month's projection. The USDA also increased its price projections for soybeans and expects cattle and dairy prices to remain at strong levels. However, the Montana sweet cherry crop is forecast to decrease 45 percent from last year.

Employment, Wages, and Prices
Employment growth was evident since the last report, and contacts noted difficulty finding workers for some jobs. In Montana, a recently reopened copper-and-silver mine has hired 150 employees, while another mine has hired 50 more workers. In South Dakota, construction recently began on a cooling system and heat exchanger plant that will eventually create 150 jobs, and a new filter production line recently created 26 jobs. A health insurance group recently reported it will hire 100 more workers in Minnesota. A temporary employment agency in the Minneapolis-St. Paul area noted that demand was up from three months ago, particularly for specialized jobs such as accounting and human resources. A bank director in northeastern Montana reported that available contractors and carpenters are hard to find. Some bankers in the Minneapolis-St. Paul area recently noted a short supply of quality commercial banking professionals. A temporary staffing agency survey of Minneapolis-St. Paul businesses found that 24 percent of respondents expect to increase employment during the third quarter of 2005, while 9 percent expect to make reductions.

Employment reductions included a boat producer in Minnesota that laid off about 145 workers due to slow demand. Restructuring at a Minnesota-based travel company will affect about 200 jobs in the state.

Wage increases were moderate. A county board in northern Wisconsin recently passed pay raises of 3 percent per year over three years for highway, forestry, and sheriff's department employees. According to a recent survey of businesses by the St. Cloud Area Quarterly Business Report, 44 percent of respondents expect to increase employee compensation by November 2005; 53 percent expect no change in compensation levels.

While overall price increases were moderate, significant price increases were noted in fuel and certain construction materials. Mid-July gasoline prices in Minnesota were 42 cents higher than a year ago, while recent jet fuel prices were 56 percent higher and diesel fuel was 64 percent higher than last year. Recent price increases were noted for some construction materials, including asphalt, concrete, and roofing materials. However, steel prices have softened since the last report.

Return to topReturn to top

Previous St. Louis Kansas City Next

Home | Monetary Policy | 2005 calendar
Accessibility | Contact Us
Last update: July 27, 2005