Beige Book Report: Minneapolis
January 28, 1981
In December and January, Ninth District business conditions remained sluggish. General merchandise sales as well as manufacturing and mining production expanded modestly, auto and home sales continued at November's depressed level, and the output of saw mills declined. These weaknesses were reflected in the continuing sluggishness in bank lending. Agricultural conditions, on the other hand, were still quite good, but recent price changes and moisture levels hint that they might not remain as good later this year.
Consumer Spending
Consumer spending continued weak. According to bank directors and
major Minneapolis-St. Paul retailers, a last-minute spurt in holiday
shopping boosted general merchandise sales only enough to match
November's modest increases. The postholiday drop in sales was no
greater than usual, which suggests that general merchandise sales,
seasonally adjusted, also expanded modestly again in early January.
These modest increases were not accompanied by gains in auto and
home sales. In December and early January, the number of new
domestic cars sold in the district matched November's low number.
Home sales also remained weak. In December and early January, the
dollar value of mortgage loan applications at Minneapolis-St. Paul
area S&Ls matched November's low dollar value.
Industrial Production and Inventories
Industrial activity also remained weak. High interest rates and
uncertainty about the economy, directors believe, made businesses
hesitant to spend and to add to their inventories. Because of this
hesitancy, directors report, most manufacturing and mining
production expanded only modestly in December/January as it did in
November. Hit much harder than manufacturing and mining was lumber
production. Reports from western Montana, for example, indicate that
many saw mills have recently shut down or reduced operations.
Financial Developments
Reflecting the weaknesses in the district's economy was the
continuing sluggishness in bank lending. Bank directors from outside
the Minneapolis-St. Paul area report that bank lending did not
pickup between November and December/January and that banks have
plenty of funds to lend. In the Minneapolis-St. Paul area, loans
outstanding at commercial banks did increase modestly between the
end of November and early January, but banks still have plenty of
funds to lend.
Agricultural Conditions
In contrast to the rest of the district's economy, agricultural
conditions remained quite good. Even though prices stopped rising,
the district in December and January continued to benefit from the
big rise in agricultural prices last summer and fall. Furthermore,
farmers have had larger than expected crops to sell at these high
prices. Final crop estimates, for example, indicate that the corn
and soybean crops in Minnesota were, respectively, 8 and 4 percent
larger than estimated last November.
Although agricultural conditions have been good, they might not continue to be in the future. Since November, for instance, farm prices have either remained the same or declined. Between November and mid-January, corn and wheat prices did not increase and soybean prices dropped 9 percent in Minneapolis. During this same period, cattle prices did not increase and hog prices declined 8 percent in South St. Paul.
The lack of moisture is also a potential problem in parts of the district. Except for the district's northeastern corner, the district has received very little snow. As of mid-January, the district's eastern half had only about an inch of snow on the ground and the western half had no snow. This lack of snow has endangered the district's winter wheat crop and aroused concerns that the soil may not have enough moisture to get this spring's crops off to a good start.