Beige Book Report: Minneapolis
September 30, 1981
The Ninth District's economy was lackluster in August and early September, despite some positive developments. The positive developments were good tourist spending, strong oil and gas exploration and production, and good growing weather. But more than offsetting these positive developments were depressed levels of consumer spending on general merchandise, automobiles, and homes; a drop-off in manufacturing orders; cutbacks in output of forest products and mining companies; and weak farm prices. The overall weakness in the district's economy was reflected in a continuing slackness in bank lending.
Consumer Spending
Consumer spending for most goods and services was sluggish. Three
major Minneapolis-St. Paul area retailers, who had reported a modest
increase in sales at the time of our last Redbook, indicate that
their sales declined slightly between July and early September. Our
Bank's directors from outside the Twin Cities also report some letup
in general merchandise sales. Home and auto sales have been
disappointing as well. According to directors, home sales remain at
the depressed levels reported in recent Redbooks. According to
regional sales managers for domestic automobile manufacturers, new
car sales in late August and early September were still at their
depressed levels of June and July.
The only positive development, according to directors, is that the late summer tourist and travel business in the Upper Peninsula of Michigan, northern Minnesota, and Montana has been good.
Industrial Activity and Inventories
Industrial activity in the district has generally been slow. In a
recent University of Minnesota survey of Minnesota manufacturers,
only 36 percent of the respondents indicated increasing orders in
August as compared to 46 percent reporting increases late last
spring. In addition, 39 percent of the current survey's respondents
reported recent inventory increases as compared to 32 percent
reporting inventory increases late last spring. Our directors
confirm this letup in new orders. A large Twin City manufacturer of
building supplies reports that its orders declined more than
seasonally in August and early September, and an Upper Peninsula of
Michigan director reports layoffs at his area s manufacturing plants
because of declining new orders.
The depressed forest products and iron mining industries have sunk further into the doldrums. Because of weak demand for building products, one large forest products company recently closed three mills in western Montana. Also, Minnesota's largest Iron Range taconite plant announced in mid-September that it was cutting its output by 40 percent.
Energy exploration and production has been the one bright spot in industrial activity. One Montana director, for example, states that 10 to 12 oil leases in his county alone in the last 60 days have provided considerable economic stimulus.
Agricultural Conditions
Growing conditions have improved since July. Excess moisture was
slowing district crop development in July, but recent hot, dry
weather has enabled most district crops to catch up. Most crops have
now matured enough so that even an early, heavy frost wouldn't
damage them, and district farmers are now expecting their corn
harvest to be 20 percent larger than last year's drought-depressed
crop.
To the disappointment of district farmers, however, agricultural prices have dropped. Since July, cash grain and livestock prices at Minneapolis and South St. Paul have either remained the same or declined.
Financial Conditions
Reflecting the sluggishness in the district's economy, lending at
district banks has been slack. Bankers throughout the district
indicate that loan demand remains at the weak level reported in
earlier Redbooks. They attribute this to the high level of interest
rates.