Beige Book Report: Minneapolis
June 20, 1990
Ninth District economic conditions have been moderately good lately, though there have been some signs of softening. Employment growth has been low, retail sales growth has fallen off, and new cars have been selling very slowly. However, some types of manufacturing have shown some strength, and conditions in resource-related industries have been excellent.
Employment, Wages and Prices
Labor markets in the district, particularly in Minnesota, have shown
some signs of softening recently. In April, Minnesota's unemployment
rate hit 5.4 percent, its highest level in over a year. There has
been essentially no growth in total employment since January in
Minnesota. Elsewhere in the district, unemployment rates were
generally lower this April than last, but the growth rate of
employment has been low.
Wage and price increases have remained moderate in the district. Employers continue to report that health care costs have been rising rapidly. Some employers in Minnesota report that high worker compensation insurance premiums have induced them to self-insure. A Bank director reports that, in Minnesota's manufacturing industry, raw material costs have remained level while finished good prices have stabilized after rising fairly rapidly earlier in the year.
Consumer Spending
Retailers in the district report some slowing of sales growth in May
after strong growth earlier in the year. One large retailer reports
that sales from January through May were about 5 percent higher than
in the comparable period last year, but that May sales were only 1
percent higher than in May 1989. Another retailer reports that sales
in May were 15 percent higher than a year ago while year-to-date
sales were 25 percent higher. The relatively slow growth in May is
largely attributed to cool, wet weather, and retailers remain
optimistic. Inventories are reported to be at acceptable levels.
New car sales have continued to be very soft in the district, particularly compared to last year. However, some dealers point out that sales last May were unusually high because manufacturers offered rebates on their cars. Used car sales, which were strong earlier in the year, also show signs or slowing.
Housing sales have generally been strong in the district, but new housing construction has been low. In the Minneapolis-St. Paul area of Minnesota, housing sales were higher in April than in any month in the last two years and May sales were 9 percent higher than in May 1989. In all of Minnesota, the number of new housing permits issued was 20 percent lower this March than last. Much of this decline is concentrated in the Minneapolis-St. Paul area, where the number of new permits declined 34 percent.
Cool weather and rain haven't dampened the spirits of travelers in the district. Michigan's Upper Peninsula and Wisconsin's Arrowhead region are expecting a good summer. The number of people crossing the Mackinac Bridge into the Upper Peninsula is at a record high. Retailers in the area report strong sales to Canadian tourists. In Minnesota, the fishing season got off to a good start, and throughout the district, campgrounds are filled on weekends. North Dakota, South Dakota, and Montana expect some decline in tourist spending from last year because 1989 was their centennial year. Montana forests are green again, with few marks left of the fire at Yellowstone two years ago. Tourist activity in Montana is expected to be strong this summer.
Manufacturing and Construction
Conditions in the district's manufacturing industries have been
mixed. Suppliers to the aircraft industry report strong sales and a
large backlog of orders, and a director reports that conditions in
capital goods industries have been "surprisingly good." Strong
growth is also reported in the printing industry and among
manufacturers of scientific and medical instruments. However, the
electronics industry in the Minneapolis-St. Paul area continues to
experience problems, and suppliers to the defense industry report
drops in production and in new orders.
Nonresidential construction in the Twin Cities area has been relatively weak. The dollar volume of contracts for future nonresidential construction in April was unchanged from a year ago. Vacancy rates for office space in this area are expected to rise sharply with the completion of several major projects.
Resource-Related Industries
The district's resource-related industries appear to be healthy. The
forest product industries remain strong, and so does mining—especially in Montana. Recent rains in the district have
substantially brightened prospects for agriculture. Minnesota's farm
fields are the wettest they've been since 1987, and only 12 percent
of the fields are short of moisture. Meanwhile, North Dakota farmers
are reported to be more optimistic than they have been in several
years, and Montana ranchers expect a record year.