Beige Book Report: Minneapolis
May 8, 1984
(Page 1 missing)Regional auto sales have continued to show the strength evident in previous months. Large domestic automakers report that monthly vehicle sales increased 50 percent between February and April. One large automaker reports that both auto and truck sales were up substantially from comparable 1983 levels and that current inventories are low. Corroborating this, Bank directors report good to strong sales in the cities within Montana, the Dakotas, and western Wisconsin.
While home buying increased in the first quarter of 1984, March sales failed to match the very high level of March 1983. In the Twin Cities, both unit and dollar sales were between 10 and 20 percent below year-ago levels in March, whereas in January and February sales had been between l0 and 20 percent above year-ago levels. Scattered reports indicate, though, that home sales remained good in other parts of the district, including Fargo, North Dakota, and western Wisconsin.
Employment
Labor market conditions have continued to improve. The seasonally
unadjusted unemployment rate in Minnesota fell from 7.9 percent in
January to 7.1 percent in March, despite an increase in the labor
force. Employment growth has been particularly robust in the Twin
Cities area, which has now regained the jobs lost during the
recession. Also, initial unemployment claims in Minnesota were 28
percent lower this March than last. In Minneapolis, the help wanted
advertising index for February was more than double its level last
February. Improvement was also noted in other parts of the district.
The unemployment rate in west central Wisconsin fell from 10.7
percent in January to 10.1 percent in February. The unemployment
rate in the Fargo, North Dakota, area also fell between those
months, from 5.1 percent to 4.6 percent. Meanwhile, the unemployment
rate in the Upper Peninsula of Michigan remained over 20 percent,
but the recently announced construction of a large paper mill should
help in the future.
Agriculture
The generally gloomy agriculture picture described in our last
report has brightened only a little lately. Dairy farmers are still
having problems in Minnesota and western Wisconsin, and the federal
dairy diversion program is not expected to help much. Farm auctions
and loan delinquencies are prevalent. Cropland values continue to
fall in South Dakota. Moisture conditions are below normal in parts
of Montana, hurting the prospects for the winter wheat harvest. Farm
equipment sales continue to be slow. Some comfort can be taken from
the recent 1 percent rise Minnesota's farm price index, from
scattered reports of increased land prices, and from the continuing
strength in livestock markets.
Resource-Related Industries
Signs of improvement have been visible in several resource-related
industries. Due to increased demand, all taconite plants in
Minnesota are now operating, albeit at an average of only 53 percent
of capacity. Two plants are running at 75 percent of capacity in the
Upper Peninsula of Michigan. Coal production is up in Montana, but
no new mines are foreseen there or in North Dakota. Oil production
is picking up in Montana and may be picking up in North Dakota. Oil
lease prices are higher in Montana now than a year ago. Wood product
sales are continuing to build throughout the district. Waferboard
plants are running constantly, and prices have firmed. Paper
production is still high in the district, and a large new mill is
being built in the Upper Peninsula of Michigan.
Finance
Neither total loans nor total deposits appear to have changed much
early this year. Commercial and industrial loans at banks in the
Ninth District rose a bit in February and fell a bit in March,
leaving the level about the same. Deposits at savings and loan
associations in Minnesota fell slightly in February. Deposits have
been fairly stable in rural areas recently. Still, both loans and
deposits were around 10 percent higher than a year ago in the first
quarter.
Variation is seen among other loan categories. Consumer loans have reportedly increased a bit in North Dakota and southern Minnesota. However, agricultural lending has been fairly flat, partly because of the higher cost of money in rural areas where incomes are depressed. Banks are keeping fairly liquid in most rural areas of Montana, where few good lending opportunities exist.