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Federal Reserve Districts

Ninth District--Minneapolis

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The Ninth District economy increased modestly since the last report. Increased activity was noted in consumer spending, tourism, residential and commercial construction, residential and commercial real estate, professional services, manufacturing, energy and mining. Hiring at district companies increased slightly, while wage pressures remained generally subdued. Overall prices were steady with some exceptions noted.

Consumer Spending and Tourism
Consumer spending grew moderately. A major Minneapolis-based retailer reported that same-store sales in September increased over 5 percent compared with a year earlier. A manager at a Minneapolis area mall reported that traffic in August and September has been busy, while a mall manager in Montana said "back-to-school" traffic in August and September was steady. A Minnesota bar and restaurant chain reported that recent sales were up about 3 percent from a year earlier. A Minnesota supermarket chain noted that consumers continued to trade downward from high-end products to value-oriented products. Auto dealers in southern Minnesota reported that sales were bouncing back to stronger levels; consumers who put off purchases over the past couple of years are now needing to buy a different vehicle.

Fall tourism activity was up slightly. The Minnesota State Fair in late August and early September was the third-best attended in history, down 1 percent from the 2009 record. Fall tourism was on par with last year in western South Dakota, according to an official. Meanwhile, a Minnesota travel agency reported that recent corporate travel was up 15 percent from a year ago.

Construction and Real Estate
Commercial construction activity increased slightly since the last report. The value of commercial building permits in September increased from a year ago in the Sioux Falls, S.D., area. Commercial construction in the Upper Peninsula of Michigan increased recently, according to a labor official. In Minnesota, a telecommunications equipment provider is building a large addition. In Montana, an agricultural supplier plans to expand its research center. However, a survey by a Minnesota building contractors association revealed a slight decline in activity over the past month. Residential construction increased. A bank director noted strong building activity in North Dakota. The value of residential building permits in September increased from last year in the Sioux Falls area. A large developer announced plans to build a $100 million apartment tower in downtown Minneapolis. However, the value of residential building permits in September decreased from last year in the Minneapolis-St. Paul area.

Commercial real estate markets were up slightly. Respondents to a Minneapolis Fed ad hoc survey indicated a slight increase in the need for additional space over the next three months. A Minnesota venture capital firm that funds minority-owned businesses noted an increase in purchases of vacant buildings. A large broker of retail space in the Minneapolis-St. Paul area noted increased leasing activity during the past two months. A broker for office space reported that leasing activity has recently edged up. However, the number of sales transactions was still low. Home sales in September were up significantly from the same period a year ago in Minneapolis-St. Paul. August sales in the Sioux Falls area increased from last year; however, the median price of homes sold in August decreased from last year.

Professional business services firms reported increased activity over the past three months. About half of services firms that responded to the Minneapolis Fed's ad hoc survey saw increased sales, while 27 percent saw decreased sales. Respondents noted that profits were also up, and they expect increased activity over the next three months. A Minnesota software company experienced double-digit revenue growth over the past two months. A recent survey of 47 Minnesota architects and engineers revealed increased activity over the past month.

District manufacturing activity increased since the last report. A survey of purchasing managers by Creighton University (Omaha, Neb.) showed an increase in manufacturing activity in Minnesota and the Dakotas in September. An ammunition producer is expanding its operations in Minnesota. An industrial heater producer has expanded operations into a formerly shuttered vehicle plant in North Dakota. In South Dakota, a plastic sheeting producer is expanding its production facility, an electronics producer opened a new plant and a new slaughterhouse should be completed in November after a delay of several years.

Energy and Mining
Activity in the energy and mining sectors continued at a strong pace. Late-September oil exploration activity increased from mid-August. A company announced plans to begin working on a $300 million wind power plant in southwestern North Dakota. District iron ore mines continued to operate at near capacity. Activity at Montana mines remains strong, driven by high metals prices, according to contacts.

Ninth District farmers are expecting smaller harvests this year, but prices remain elevated. An early frost in late September may reduce corn and soybean yields around the District. Recent dry weather has been a boon to wheat harvesters, but overall wheat production in District states is expected to be about 15 percent lower than last year, according to U.S. Department of Agriculture estimates. Prices for corn, soybeans, wheat, dairy products, poultry and hogs fell slightly since the last report; cattle prices increased recently. In spite of these recent declines, prices for many District agricultural commodities remained well above their year-earlier levels.

Employment, Wages, and Prices
Hiring at district companies increased slightly. A Minnesota firm that provides automation technologies and services to the oil and gas industries announced plans to add 100 workers. A bank will add 90 workers in Minnesota to deal with a surge in refinancing. A mine in the Upper Peninsula of Michigan was having some difficulty hiring 90 additional workers. A North Dakota bus plant will add over 50 workers, and a South Dakota health care record processing company will hire 20 new workers. According to a survey of construction-related firms in Minnesota, 18 percent expect to increase hiring in 2012, while 33 percent expect to decrease hiring; nevertheless, these responses were more optimistic than last year's survey.

Wage pressures remained generally subdued. However, in North Dakota, some wage increases were reported due to gains in hiring related to the oil industry.

Overall prices were steady with some exceptions noted. Bank directors reported that generally companies were resistant to increasing prices for their final products and services over the next six months. Minnesota gasoline prices were down 40 cents per gallon in early October compared with early September. However, some business contacts reported recent increases in health care costs. According to the Minneapolis Fed's ad hoc survey, 45 percent of respondents indicated that input costs were up from a year ago.

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Last update: October 19, 2011