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Ninth District--Minneapolis

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The Ninth District economy grew moderately since the last report. Consumer spending, tourism, residential real estate and construction, services, manufacturing, energy, mining and agriculture saw increases. Commercial real estate was flat at low levels, and construction activity was slow. Labor markets remained weak, but some signs of hiring were noted. Overall compensation levels were flat, and price increases were moderate.

Consumer Spending and Tourism
Consumer spending increased modestly. A Minneapolis-St. Paul area mall noted that February same-store sales were up 7 percent compared with a year ago; traffic levels were up even more. A major Minneapolis-based retailer reported that same-store sales in February were up about 2 percent compared with a year earlier. Recent retail activity in Great Falls, Mont., has picked up modestly; Canadian traffic was solid. A Minnesota-based restaurant and bar chain noted that March sales and guest counts were up over 5 percent compared with a year ago, while another Minnesota-based restaurant chain reported that March sales were down 2 percent.

Vehicle sales picked up in March compared with a year ago when sales were substantially down. A number of dealerships in the Minneapolis-St. Paul area reported that sales were up over 40 percent in March compared with a year ago; strong incentives by automakers helped boost sales. Recent vehicle sales have been steady in North Dakota, according to a representative of an auto dealers association.

Overall travel and tourism activity was up slightly. A ski resort in northern Minnesota noted that February and March ski lift sales and lodging were higher than a year ago. A Minnesota-based travel agency noted that corporate travel during February and March was up slightly from a year ago. Winter tourism activity was about even with a year ago in Montana, but tourism-based businesses noted an uptick in February and March, according to an official. In northwestern Wisconsin, excellent snow conditions boosted snowmobiling and cross-country skiing in February; warm weather in March brought an early end to snow sports, but tourism businesses are optimistic for the summer season.

Construction and Real Estate
Commercial construction was weak. February nonresidential permits in Sioux Falls, S.D., were substantially lower than a year earlier. A producer of commercial construction materials said demand has been slackening. However, several hotel and medical developments are in progress in Great Falls, Mont.

Meanwhile, residential construction showed signs of strengthening. March home building permits for the Minneapolis-St. Paul area more than doubled in value from the same month a year earlier--their highest level since 2007--primarily due to gains in the multifamily sector. In contrast, February residential permits in Sioux Falls decreased 21 percent from a year earlier. Construction activity in western Montana continues to be very slow, according to developers there.

Commercial real estate was flat at low levels. A commercial real estate broker in Fargo, N.D., said vacancy rates were down slightly for office properties, but the industrial segment was weaker. A Minnesota commercial broker said rents there were at their lowest levels since 1990.

Residential real estate continued to rebound. Closed sales in late March were 11 percent higher than a year earlier in Minneapolis-St. Paul, and sales prices increased. Sales also picked up in western Montana, due in part to big reductions in asking prices.

Overall activity increased slightly in the professional business services sector since the last report. Contacts from information technology and Web development firms noted solid orders. A law firm that specializes in debt collections and another that specializes in bankruptcies were expanding due to strong demand. However, contacts from other law firms indicated that new business was unchanged. Architects indicated flat activity at low levels.

Manufacturing output was up since the last report. A March survey of purchasing managers by Creighton University (Omaha, Neb.) showed that manufacturing activity increased significantly in Minnesota and South Dakota and was flat in North Dakota. A small Minnesota transmitter maker plans to expand into a larger facility. In North Dakota, a wind energy component manufacturer plans to build a plant.

Energy and Mining
Activity in the energy and mining sectors increased since the last report. Late-March oil exploration increased significantly from early February. A major electrical utility recently announced plans for a large-scale wind energy farm in western Minnesota. Several sources noted solid prices and demand for iron ore, as production in February increased slightly from January levels.

Agricultural activity increased. The calving season was progressing very well due to the mild end to winter across most of the District. Cattle producers were optimistic, as they expected a continued uptick in output prices. District farmers planned to plant 3 percent more soybean acres, 4 percent fewer wheat acres and about the same number of corn acres as last year, according to the U.S. Department of Agriculture. Meanwhile, producers of organic agricultural products noted a decrease in demand, and dairy producers were concerned about softening in output prices.

Employment, Wages and Prices
Labor markets remained weak, but some signs of hiring were noted. A tractor supply store in eastern Montana reported receiving more than 30 applications for every job opening. Employers in the Sioux Falls area noted a relatively large number of applications for seasonal jobs. Also in South Dakota, 35 workers were laid off at a technology firm, and about 25 workers were laid off at a business outsourcing company. A North Dakota manufacturer announced plans to lay off 60 workers.

In contrast, two employment placement firms in Minnesota reported an increase in hiring for some entry level positions and an increased interest in executive placement services. Also in Minnesota, a bank announced intentions to hire more wealth management advisors, a wind energy project just under way will create 150 jobs and an auto dealer will hire 15 salespeople.

Overall wages were flat, as a number of contacts noted that wages and salaries at their companies were level with a year earlier. The University of Minnesota's faculty senate recently approved a measure to cut pay temporarily for most University employees by about 1 percent.

Price increases were moderate. Minnesota gasoline prices at the end of March were up slightly from the end of February. However, copper and nickel prices increased since the last report, as well as some prices for lumber and steel products.

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Last update: April 14, 2010