Beige Book Report: Minneapolis
September 9, 1980
In August, the District economy continued to show signs of improvement. Retail sales, home sales, and manufacturing activity all picked up, leading to increased lending at savings and loans. Reflecting these developments, fewer District workers were laid off and more were hired in August than in July. Auto sales, metal mining, and commercial bank lending remained fairly weak, however, and excess autos and iron ore were the District's two biggest inventory problems.
Consumer Spending
The freer consumer spending begun in July appears
to have carried over into August. Directors say that in their areas
retail and home sales either stayed the same or increased between
July and August. Directors were concerned, though, that higher
mortgage interest rates could stall the home sales recovery.
In contrast to retail and home sales, District auto sales have not yet begun to recover. New domestic car and truck sales declined between July and August.
Industrial Activity
Manufacturing activity, like consumer spending
generally, continued to show signs of improvement in August, but
mining activity did not. A large Minneapolis-St. Paul manufacturer
says its new orders increased between July and August. In Montana,
lumber manufacturing started to revive, and in the upper peninsula
of Michigan, a large foundry's new orders picked up, which is
usually a good sign for other types of manufacturing. In contrast,
metal mining did not improve. Copper mining in Montana was shut down
by a strike in both July and August, and reduced demand for steel
held down iron ore shipments from Minnesota and the upper peninsula
of Michigan during both these months.
Inventories
Reflecting conditions in the District's industries,
inventories were generally satisfactory in August. District
businesses were reportedly being cautious in their inventory
policies. The only serious inventory imbalances were in the two weak
industries: There was an excess of autos and taconite pellets (that
is, iron ore, resulting from the drop in steal production).
Labor Markets
Consistent with the other signs of recovery, District
firms laid off fewer workers and hired more in August than in July.
Although initial claims were up considerably from a year ago, the
number of laid-off workers applying for unemployment compensation
dropped 8 percent between July and August. Help-wanted advertising
in Minneapolis' two major papers increased 22 percent between July
and August.
Agriculture
Complementing the improvements in nonagricultural
activity, recent rains and rising farm product prices were helping
the District's farmers and ranchers. Drought conditions eased in
August. Although the rains came too late to help the wheat crop,
prospects Improved for the District's corn and soybean crops. Prices
for most farm products improved between July and August too. In
Minneapolis, average cash prices increased 7 percent for corn and 3
percent for soybeans. Wheat prices, however, did decline 6 percent,
but they were still above last spring's level. In St. Paul, average
livestock prices rose 5 percent for feeder cattle and 13 percent for
hogs.
Financial Developments
The District economy's recent improvements
increased lending at savings and loans, but not at commercial banks.
Reflecting the recent pickup in home sales, the dollar value of
mortgage loan applications at Minneapolis-St. Paul saving and loans
rose 60 percent between July and August. At the same time, lending
at commercial banks in that area was unchanged. Directors from
outside the twin cities also report no change in their banks'
lending.