The Federal Reserve Board eagle logo links to home page

Beige Book logo links to Beige Book home page for year currently displayed October 12, 2006

Federal Reserve Districts

Ninth District--Minneapolis

Skip to content

New York
St. Louis
Kansas City
San Francisco

Full report

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 companywide.

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.

Return to topReturn to top

Previous St. Louis Kansas City Next

Home | Monetary Policy | 2006 calendar
Accessibility | Contact Us
Last update: October 12, 2006