Beige Book Report: Minneapolis
September 19, 1990
Ninth District economic conditions have been moderately good lately. While labor market and manufacturing conditions have been mixed and construction activity has been weak, tourist spending has been strong, and new-car sales and retail sales in general have been fairly good. Resource-related industries have been doing well. In general, wage and price increases have been moderate. The Gulf crisis has not yet affected the district's economy much.
Employment, Wages and Prices
Labor market conditions have been mixed in the district. After
showing signs of improvement during the second quarter of the year,
Minnesota's unemployment rates have begun to drift up. The state's
overall unemployment rate was 4.6 percent in July, up from 4.2
percent in June and 4.1 percent in July 1989. In the district's
other states, unemployment rates in June and July were roughly at
the same level as last year. At the same time, firms throughout the
district continue to report difficulties in filling entry-level and
part-time positions, even at wages well above the minimum wage.
Wage and price increases in the district have remained moderate. Wages have generally increased only at annual rates of 3 to 5 percent. The Gulf crisis has not resulted in a sharp acceleration in the district's inflation rate—though, as is to be expected, gasoline prices have risen sharply. Some prices charged by freight companies have also increased. Prices of agricultural products have recently been declining, though they are still well above the levels of a year ago.
Consumer Spending
District retailers of general merchandise report good sales growth
lately. One major retailer reports that, compared to a year earlier,
sales in August were up 8 percent and sales in the first eight
months of the year were up 6.1 percent. An appliance retailer
reports that sales in August were 3 percent higher this year than
last. In North Dakota and Montana, retailers report that shoppers
from Canada have contributed to strong sales. In North Dakota, sales
tax collections have risen sharply from a year ago. Throughout the
district, inventories are reported to be at acceptable levels.
Tourism remains the brightest spot in the district's economy. Motorcycle enthusiasts recently held their 50th annual gathering in the Black Hills of South Dakota. This rally reportedly brought an estimated $30 million into the local economy. Also, resort owners in the Upper Peninsula of Michigan, Wisconsin's Arrowhead region, and northern Minnesota report fairly high levels of reservations for the fall colors viewing season. However, district resort owners generally are apprehensive that the recent rise in gasoline prices may crimp tourist activity.
New-car sales have been fairly good recently. One major dealer reports that sales at the end of August were strong. Dealers are cautiously optimistic about prospects for the second half of the year. Inventories of cars and trucks are reportedly at comfortable levels.
The district's housing activity has improved recently, after having shown signs of softening earlier in the year. The number of new housing permits issued in Minnesota, for example, was 6 percent higher this July than last. The number of houses sold in the Minneapolis-St. Paul area during the first eight months of the year was 6.6 percent higher than a year ago.
Construction and Manufacturing
Conditions in the district's construction industry in general have
been weak recently, particularly in the Minneapolis-St. Paul
metropolitan area. In that area, the dollar value of contracts for
future construction in June was 27 percent below the value a year
ago. This area's weakness is expected to continue for at least a
couple of years.
Conditions in the district's manufacturing industries have been mixed lately. Domestic orders for producer equipment have been lower than last year, but strong foreign demand has more than made up for that. The medical technology industry has grown strongly, but the electronics industry has continued to struggle. Manufacturing firms, in general, express serious concern about the increased probability of a recession.
Resource-Related Industries
The district's resource-related industries appear to be fairly
healthy. Excellent rainfall throughout the district has improved the
outlook for farmers. The spring wheat harvest in Minnesota is
expected to be the best in three years. In that state, the corn
harvest is expected to be 5 percent higher than last year, but the
soybean harvest is expected to be 10 percent lower, due primarily to
fewer acres being planted. Farmers in North Dakota have had the best
wheat crop on record. The mining industry is also doing well.
However, the lumber and paper products industry, which has been
growing strongly for the last two years, reports recent setbacks.
Prices of products used in home construction have declined sharply.
And according to several firms, finished paper inventories have been
rising.