Beige Book Report: Minneapolis
August 10, 1983
Signs of the economic upturn continue to be evident in the district. Consumer spending for general merchandise, autos, and housing are up. Tourism is helping to maintain the momentum. There is strong demand for products produced by several important industrial sectors, and the financial sector is busy. Employment is up slightly. However, agricultural performance is still mixed, and mining related business is still depressed.
Consumer Spending
Despite oppressively muggy weather, the recovery fueled increase in
consumer spending shows no sign of ending. Leading the way are large
Twin Cities retailers, who continue to report healthy sales
increases in the district. One reported its best sales in two years,
while another is experiencing its best June and July in "a great
many years." The region's largest retailer had a whopping sales
increase over the previous month. Sales in cities appear to be
strongest. Another indicator of retail strength is the 5 percent
increase in sales tax revenues paid in one district state to date.
Housing activity is continuing to build. Twin Cities housing sales for the first half of 1983 finished around 43 percent higher than in the first half of 1982. June sales were up over 15 percent from May sales and South Dakota sales were up 35 percent over the sane period. Building permits in Minneapolis/St. Paul are running at close to twice the rate of a year ago. Condominium and luxury home building appear to be particularly strong in Billings, Montana. Activity is also up in Fargo and Bismarck, North Dakota.
In addition to the positive economic outlook, state low-interest housing programs are helping the trend to continue. South Dakota and Minnesota housing programs seem particularly active.
Auto sales are also moving ahead at a rapid clip. One of the big four domestic manufacturers said that June was its best month in Minnesota in three years. The trend is evident in other district states, too. From the Upper Peninsula of Michigan to Montana, district directors report auto sales to be good. Large automobile sales have been particularly strong in South Dakota, showing a 60 percent sales gain over 1982.
Competitive factory financing and an imminent sales tax increase in Minnesota are complementing the economic upturn in producing these good figures.
Tourism
Tourism plays a large role in the district's summer economic
picture, and provided further evidence of the district's improving
condition. Tourist information inquiries were up 10 percent over a
year ago in both Montana and Minnesota, and are also higher in the
Upper Peninsula of Michigan and in the Indianhead region of
northwestern Wisconsin. Mount Rushmore, South Dakota had 28 percent
more visitors over the July 4th weekend this year than last year.
The majority of respondents to a July survey of Minnesota resorts
reported that business was up this summer, and that they plan to
invest in resort expansion projects. Sundecks, for example, are a
popular investment. Similar sentiments are reported in Montana.
The economy affects more than just the number of visitors, though. Many tourism officials perceived a trend toward shorter vacations, with less lengthy stays at resorts. One official attributed this to consumer uncertainty about the economic outlook.
Industrial Activity
Signs of improvement continue to be seen, with some exceptions. In
Minnesota, one large multi-sectoral manufacturing concern reports
that unit sales are much further ahead than a year ago. A
manufacturer of large computer mainframes is having trouble meeting
the unexpectedly strong demand for its products. A logging equipment
manufacturer in the Upper Peninsula of Michigan has hired more
workers. And other sectors in the wood product industry report
encouraging signs, too. Both waferboard and coated printing paper
demand is very strong. Even with increased demand, though, South
Dakota manufacturing is still well below capacity. And as reported
last month, mining and its related industries are still in a bad
state. A taconite operation, open during June in Minnesota, closed
recently and won't reopen until late October.
The economic upturn is not the only reason for these generally encouraging signs. Some firms report that the recession forced them to adopt improved cost containment and managerial strategies, which are contributing to a healthy profit outlook.
Agricultural Conditions
Agricultural conditions are still mixed. While the dry conditions in
Montana were somewhat alleviated by recent rains in the northeast
section of the state, crops are still reported to be in only fair to
good condition statewide. The northwestern and western parts of
South Dakota are still suffering from drought conditions. Also, corn
borer infestations are widely reported. But, while crop conditions
are behind normal in Minnesota, they are catching up. And in North
Dakota and the rest of South Dakota, crop conditions are good to
excellent. Price performance is also mixed. While corn prices are
moving up, soybean and wheat prices are only holding equal to last
year's low prices. A recent survey of district-agricultural lenders
showed that farm spending was no higher than it was last year.
Employment
Employment conditions continue to improve throughout the district.
The seasonally adjusted district unemployment rate fell in June to
8.0 percent, down from 8.5 percent in April and 8.2 percent in May.
District employment grew about 10,000 workers in June, the first
such increase since January. A director reports that South Dakota
Job Service placements are way up, and the Conference Board' s Help
Wanted Advertising Index corroborates these data. The Minneapolis
index was 16 percent higher in June than in May, and was 13 percent
higher than in June 1982.
District employment should continue to improve as output and capacity utilization pick up.
Financial Developments
District member banks' performance reflects the recent strength of
the district economy. Total lending in June and July was up by
nearly a billion dollars, with both country banks and large Twin
Cities banks sharing in the growth. Total deposits also grew
substantially during this period, although a few large Twin Cities
banks' deposits fell in July. When compared to July 1982, total
loans and deposits grew in July by 14.3 and 9.6 percent,
respectively.