Date: September 17, 2003 FOR IMMEDIATE RELEASE

Contacts: Patti Lorenzen 612-204-5261 patti.lorenzen@mpls.frb.org Toby Madden 612-204-5372 toby.madden@mpls.frb.org

Minneapolis Fed survey finds manufacturers
cautiously optimistic for second half of 2003

MINNEAPOLIS, September 17, 2003—Ninth District manufacturers predict continued growth in production and number of orders, but they are not as optimistic about increased employment and profits. These are the results of a recent survey of manufacturers conducted by the Federal Reserve Bank of Minneapolis and the Minnesota Department of Employment and Economic Development.

Six months ago, manufacturers predicted increased orders in 2003—and the current survey confirms that the increase did indeed occur. The survey also shows increased production levels in the Ninth District. However, expanding orders and production do not necessarily translate into increased returns, as the large majority of respondents report falling profits in the first half of 2003, compared with the latter half of 2002. Most respondents expect these trends to continue for the rest of the year.

While growth in orders and production is expected in all states, only in Michigan’s Upper Peninsula are profits predicted to rebound during the second half of the year.

Smaller employers are generally more optimistic about second-half results. Manufacturers with fewer than 50 employees expect expansion of orders, production, employment and prices, compared to those with more than 250 employees. However, where it counts, bigger is better as larger employers anticipate stable profits, while smaller companies predict somewhat falling profits.

Based on responses to questions relating to number of orders, capital investment, employment and profits, overall survey results point to slightly improving general economic conditions across the district during the second half of 2003. Survey respondents from all district states anticipate consumer spending and the general economy to grow significantly. Meanwhile, companies from across the district expect inflation to heat up in the second half of 2003.

The survey elicited 562 responses from 2,969 randomly selected manufacturing companies in Minnesota, Montana, North and South Dakota, northwestern Wisconsin and the Upper Peninsula of Michigan. The Minnesota Department of Employment and Economic Development conducted the Minnesota portion of the survey. The sampling error is +/- 4.1 percentage points. See complete survey results.

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.

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