Beige Book Report: Minneapolis
July 1, 1980
The Ninth District is not in a recession. Total economic activity is up from a year ago, and there are signs that conditions may have brightened recently for the District's farmers and retailers. District economy activity, however, is being restricted by a further softening in sales of motor vehicles and homes and in manufacturing activity.
No District Recession...
The District appears to be avoiding a recession. Employment is up
from a year ago. Minnesota employment in May, for example, was up
2.3 percent from a year ago while national employment was up only
0.5 percent. Supporting the employment data, directors' comments
indicate that overall economic activity is greater than a year ago.
In the District's eastern half, fairly strong industrial output and
nonresidential building are preventing the economy from declining.
Meanwhile, in the District's western half, oil and coal exploration
and production are boosting the economy.
There are also signs of improvement in District retail sales. A major retailer in the District indicates that its sales have recently picked up; in June it expects its largest year-to-year sales increases so far this year. Confirming this report, a Minnesota director reports that retail sales recently have improved in his community. District retailers, however, are still very cautious and are watching their inventories closely.
Conditions have also improved somewhat for most District farmers. Recent increases in farm prices may have halted the decline in farm income this past winter and spring. Although drought conditions in northeastern Montana, northwestern South Dakota, North Dakota, and northwestern Minnesota are still endangering crop yields, most District crops have gotten enough rain to have a good start. While farm income is still down from a year ago, the decline is probably not as large as was indicated by conditions several weeks ago.
...But Some Sectors Are Declining
While the District economy so far has avoided a recession, some
sectors are weaker than several weeks ago.
Motor vehicle and home sales have declined further. In May, District domestic auto and truck sales were down 44 percent from a year ago, as contrasted to a 36 percent drop in April. In addition, bank directors indicated that their communities' housing sales in June have continued to decline from a year earlier.
Not only motor vehicle and home sales, but manufacturing activity has been declining. A majority of the manufacturers responding to a May survey conducted by the University of Minnesota reported declining new orders and production, many more than a year ago.
Reflecting poor motor vehicle, home, and manufacturing performance, lending has weakened. Mortgage loan applications at Minneapolis/St. Paul S&Ls in June were down 60 percent from a year ago, as they were in April. Despite falling interest rates, this softening in home loans has spread to other types of lending. Loans at Minneapolis/St. Paul banks in mid-June were up 5 percent from a year ago, as compared to an 11 percent increase in late April.