Contact: Media Representative 612-204-5261 Date: December 23, 1998 FOR IMMEDIATE RELEASE

Upper Midwest Economic Forecast for 1999

Please note: The following reports contribute to the Minneapolis Fed's economic outlook for 1999, and will appear in the January 1999 issue of the fedgazette.

Economic Forecast*
The Ninth District economy continues to expand in 1998 despite gyrations in the financial markets and turmoil in the international economy, and further growth is forecast for 1999. However, considerable uncertainty surrounds these forecasts, and they may be on the high side as employers continue to have difficulty hiring workers.

• Nonfarm Employment: Between 1998 and 1999 nonfarm employment growth is expected to increase across the Ninth District.
• Unemployment Rate: In 1999 unemployment rates across the District will remain well below their historic averages.
• Personal Income: Personal income growth will continue to advance moderately.
• Housing Units Authorized: Home building will decline in some district states.

District Business Leaders Poll Results**
Business leaders are more subdued about the business outlook than they were a year ago, but the issues confronting them appear to be unchanged. Seventy percent of all respondents are somewhat or very optimistic about their communities' prospects for the coming year as contrasted to 86 percent a year ago. Their reduced optimism extends to investment spending, employment, consumer spending and housing starts. Although wage increases are expected to remain modest, securing workers remains the most serious challenge—the same concern they had last year.

Agricultural Credit Conditions Survey Results***
Bankers continue to describe their farm customers as facing strong financial stress from low prices, but some are somewhat more positive at year's end than they were in the third quarter. Estimates of income improved slightly and the proportion of farmers at their debt limits improved somewhat. Interest rates dropped modestly for all categories of loans. Land prices are largely stagnant overall , but many bankers report actual decreases in their areas.

As one of the 12 Federal Reserve Banks, the Federal Reserve Bank of Minneapolis contributes to a variety of Federal Reserve System functions, including operation of a nationwide payments system, distribution of the nation’s currency and coin, supervision and regulation of member banks and bank holding companies, and serving as a fiscal agent for the U.S. Treasury. Additionally, the president of the Minneapolis Fed serves as a member of the Federal Open Market Committee, the monetary policymaking arm of the Federal Reserve’s Board of Governors. Together with its branch in Helena, Mont., the Minneapolis Fed serves the Ninth Federal Reserve District, which includes Minnesota, Montana, North and South Dakota, 26 counties in northwestern Wisconsin and the Upper Peninsula of Michigan.

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* These forecasts come from national and regional models developed by researchers at the Minneapolis Fed. The models use a statistical procedure known as Bayesian vector autoregression.

** These are key findings from a poll of 209 business leaders in the Ninth Federal Reserve District, conducted in mid-November.

*** These findings are based on a November survey of 104 agricultural lenders in the Ninth Federal Reserve District.