Beige Book Report: Minneapolis
October 10, 1979
The Ninth District economy appears generally better now than a month ago. Agricultural conditions were improved by the recent settling of the Duluth/Superior grain handlers' strike and by excellent weather, and nonagricultural conditions continue to be favorable, as they were last month.
An Improved Situation for Agriculture
The district's agricultural situation has brightened in the last
four weeks. Farmers can market their grains easier now, because the
grain handlers' strike, which had closed down an important outlet
for Upper Midwest grains since early July, was settled in late
September. In addition, farmers are going to have more crops to sell
than was expected in August. Due to the late maturity of the
district's corn and soybean crops, many farmers feared that frost or
rainy weather in September would significantly reduce their yields.
But last month's warm, dry weather has allayed their fears.
A Generally Favorable Situation for Other Industries
These heartening agricultural developments complement the district's
nonagricultural developments. The nonagricultural indicators show
that the district is not in a recession, as they did last month. Our
September Redbook Report stated that district labor market
developments, corporate earnings, loan requests, and manufacturing
sales indicated considerable strength in the regional economy.
Information on corporate earnings and manufacturing sales is not
available this month, but recent information on district labor
markets and loan requests reconfirm last month's observations.
District firms are still hiring workers instead of laying them off, as the district's current large volume of help wanted advertising suggests. The absence of layoffs last month is reflected in the low number of workers presently claiming unemployment compensation. Loan requests at district banks also reflect the strength of the district's economy. Most bank directors report strong business loan demand at their area's commercial banks and attribute this demand to the district economy's current strength.
This strength is also confirmed by indicators of capital spending and inventories, which we did not cover last month. The usual easing in capital spending that accompanies a recession has not occurred. In the Minneapolis/St. Paul area, a sizable number of large commercial construction projects is under way. Outside the Twin Cities, several directors indicate that their area's businesses are either expanding or improving their facilities. In addition, the unwanted inventory accumulation that characterizes a recession has yet to occur in the district. With the exception of large automobiles, directors report that district firms are not confronted with excess inventories. In fact, two large manufacturing firms located in the Minneapolis/St. Paul area indicate that their inventories of finished goods are lower than desired, and three of the area's largest retailers report that present inventories are satisfactory. Due to sales promotions, even the troubling auto inventory situation is better now than in July and August.
Some Problems
Despite this generally rosy assessment of the district's economy,
there are some problem areas. Last month our Redbook Report
indicated that district consumers were reluctant to spend, and this
situation hasn't changed. Two large Minneapolis/St. Paul retailers
report weak September sales. Several directors from outside the Twin
Cities report that their area's retailers are still having
difficulty moving merchandise. Home sales also continue to be slow.
In many communities home listings are up substantially from a year
ago.
Finally, some directors say that high interest rates are causing problems for some small businesses.