March 6, 2002 Federal Reserve Districts Ninth District - Minneapolis

Skip to content Summary Districts Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Full report

Overall economic activity in the Ninth District appears to have edged up in recent months. Residential construction and mining activities are up slightly. The commercial construction, tourism and energy sectors have slowed. Meanwhile, the consumer spending, manufacturing and agriculture sectors are mixed. From early January to mid-February, labor markets loosened slightly, while overall wages and prices were stable. However, decreases in some construction materials prices and increases in home prices and insurance premiums were noted. Construction and Real Estate Commercial construction activity is soft. Contracts awarded for heavy construction projects decreased 22 percent in the three-month period ending in January compared with the same period last year. A representative of a commercial construction company said that the market has bottomed out in the Minneapolis-St. Paul area. Vacancy rates in the industrial markets of some Minneapolis suburbs are as high as 17 percent. District home building is solid. Home permits in the Minneapolis-St. Paul area were up 7 percent in January compared with a year earlier, with strength particularly noted in multi-family construction. According to residential construction officials in Sioux Falls, S.D., home builders are expected to be busy in 2002, but the year is likely to finish somewhat slower than the previous two record-breaking years. A contractor in Bismarck, N.D., expects to build 25 percent more housing in 2002 compared with a year earlier. Bank directors reported that the outlook for residential construction is optimistic for the upcoming year, with softness noted in the high-end housing market in Montana. Consumer Spending and Tourism Consumer spending is mixed. A major Minneapolis-based department store retailer reported that overall same-store sales in January were up 6 percent compared with a year earlier. A Minneapolis area mall manager estimated that sales increased about 4 percent in February compared with a year ago. In North Dakota a mall manager expects February sales to finish up 3 percent to 5 percent compared with last year. In contrast, a St. Paul area mall manager noted slightly less traffic in January and February compared with last year. A Helena branch bank director reported slow February traffic at a Montana mall compared with a year ago. A Minnesota-based leather products retailer said that same-store sales in January were down 17 percent compared with last year. Auto sales in Minnesota slowed in January and February, according to a representative of an auto dealers association. Little snowfall and warm weather has halted winter tourism activities in many areas. Some businesses in the Upper Peninsula of Michigan expect the season to be off as much as 40 percent to 50 percent due to poor snowmobiling conditions. A tourism official in South Dakota estimated ski activity down 45 percent and snowmobiling down 70 percent this year compared with a year ago. However, traffic at Mount Rushmore, considered a "fair weather" attraction, set monthly attendance records from October through January. A ski resort in Montana reported good snow conditions this year and an increase in visits over last year. Manufacturing Manufacturing activity is mixed. Preliminary results of a February survey of Minnesota manufacturers reveal that production in the first half of 2002 will be higher than the levels of the last half of 2001. However, a January survey of purchasing managers by Creighton University indicated slight decreases in manufacturing activity in Minnesota and South Dakota and slight increases in North Dakota. In Minnesota, a factory that produces industrial abrasives plans to severely curtail output. However, a data storage producer in North Dakota plans to expand output and employees this spring, and a new pasta plant is expected to begin production in April. In addition, a new dairy plant is scheduled in the Upper Peninsula of Michigan. A Montana steel producer plans to expand output to meet demand for a new short-distance rail line, according to a Helena bank director. Mining and Energy Activity in the energy sector is down somewhat, while mining is up slightly. Mid-February district oil and natural gas exploration and production levels were slightly behind the levels of early January. Meanwhile, the iron ore industry is up slightly in the first two months of this year compared with November and December of last year. Production at a large mine in northern Minnesota returned to more normal levels and another mine expects to resume production in March. Mining production is stable to up slightly in Montana, according to a state mining official. Agriculture Dry and warm weather conditions have favored livestock and dairy producers but have hampered crop producers. Livestock producers report little stress on their herds, due to the unseasonable warm weather across the district. Meanwhile, the Montana Agricultural Statistics Service reported that winter wheat producers are increasingly concerned about the lack of snow cover to protect from cold temperatures and gusty winds. Winter wheat snow cover was rated at 69 percent very poor, while wind damage was rated at 28 percent heavy. Freeze and drought damage was rated at 41 percent heavy. Employment, Wages, and Prices Some layoff announcements were cited since the last report. A large computer maker will cut more than 500 positions at two South Dakota plants. A high-tech manufacturer announced job cuts that may include closing a St. Paul plant, affecting 86 workers. A Minnesota-based airline will cut 64 mechanics positions. As a marker of looser labor markets, a Minnesota company recently reported a 70 percent acceptance rate of offers made to applicants for open positions, an increase from a historical average of 50 percent. Initial claims for unemployment insurance in Minnesota were up 28 percent in January compared with a year earlier, including a large increase in claims from the construction sector. In contrast, a computer company is planning to hire 100 employees in North Dakota. Furthermore, U.S. Customs will add 39 jobs at North Dakota's border with Canada. A call center in northern Minnesota will add 65 more workers. Wage increases are modest. St. Paul public school teachers recently agreed to a 2 percent increase in pay; the overall wage and benefit package was considered average compared with recent contracts, according to a union official. In contrast, according to the results of a December St. Cloud Area Quarterly Business Report survey, 55 percent of respondents in central Minnesota expect increases in employee compensation by June. Price increases are moderate, with price decreases noted in some construction materials and increases in home prices and insurance rates. Recent steel and cement prices have decreased slightly from a year earlier. Meanwhile, the median price of homes recently sold in Minneapolis-St. Paul is up 12 percent compared with a year earlier. Some home insurance premiums during the past two months are 10 percent to 30 percent higher than last year in North Dakota, according to an official. Return to top St. Louis Kansas City