Beige Book Report: Minneapolis
January 21, 1993
The Ninth District economy continues to strengthen slowly, led by consumer spending and construction. Retail sales for the holiday season were excellent. Residential construction is much stronger than a year ago as is heavy construction. Reports on winter recreation are generally good, in spite of unfavorable weather. Labor markets show tentative improvement. Some forest products manufacturing is strong, but mining and energy production remain slow. In agriculture an extremely late harvest is now largely complete. Some farm prices have declined slightly.
Consumer Spending
Consumer spending in December was very strong. News media from
across the district generally report strong retail sales for the
holidays; several retailers described the season as the best in
several years. Two Minnesota-based retailers reported same-store
sales for December 9 percent and 13 percent above a year earlier.
At both ends of the district, recreation sector officials report that winter recreation such as skiing and snowmobiling is now good after late arrival of snow cover. Reports from the Upper Peninsula of Michigan describe resort and motel business above that of 1991. A Minneapolis Fed Advisory Council member reports that winter recreation businesses across Montana are having a good season in comparison to last year.
Construction and Home Sales
Construction, especially of homes, is strong across the Ninth
District. Residential construction is reported very active in
western South Dakota and Wisconsin's Chippewa Valley. The
Minneapolis-St Paul metropolitan area experienced the best growth;
the number of residential building permits issued in November was
nearly 52 percent above the level a year earlier. News reports from
across the district note that home builders anticipate the busiest
winter construction season since 1986-1987.
As in residential construction, contract awards for new roads, bridge, sewer and water projects jumped sharply in November. For Minnesota and the Dakotas such awards were nearly double those of November 1991, and the total for the first 11 months of 1992 were 17 percent above 1991. Actual construction resulting from many of those contracts will not begin until late winter or early spring.
Specific new private-sector building projects include a shopping center in Billings, Mont., an addition to a computer disk drive factory in Sioux Falls, S. Dak., and a large retail facility in Mankato, Minn. Also announced was a 100,000 square foot addition to a shopping mall in Sault Ste. Marie, Mich. Strong shopping by Canadians in this border town was reportedly a major motivating factor for this investment.
Forestry, Mining and Energy
Minnesota forestry industry officials report strong demand for
lumber and for plywood substitutes, and production levels at most
plants are high. A $500 million rebuilding of a plant at Cloquet,
Minn., which produces a plywood substitute, is underway and will
substantially increase its capacity. In contrast, the paper industry
faces low prices and has slack capacity.
Metal mining continues weak. An iron mine in northeastern Minnesota sent home 600 workers for six weeks, and a Michigan mine with 700 employees shut down for two weeks. Both shutdowns were reportedly due to slack orders. One positive note was the start of work at a new open pit mine near Ladysmith, Wis. The mine, which will produce copper, gold and silver, is the first new metallic mine opened in Wisconsin in 25 years.
Oil production in North Dakota and Montana in December and for 1992 was generally unchanged from 1991. But exploration activities continue to decline; December rig counts for North Dakota and Montana were down 20 percent and 40 percent respectively from a year earlier and both are down about 60 percent from December 1990. One exception was the announcement that a new well will be drilled in south-central South Dakota in a previously untried area.
Labor Market Conditions
Labor markets show tentative strengthening. Employment numbers and
unemployment rates are essentially stable but initial claims for
unemployment insurance fell sharply in Minnesota and Wisconsin in
December.
Few large layoffs were reported in the district. A prominent Minnesota-based airline announced a nationwide layoff of over 1,000 employees, but less than 200 of these were based in the district. Layoffs of 80 and l00 workers took place at two Minnesota computer equipment firms, in addition to seasonal layoffs of casino workers. Also laid off were 30 Billings, Mont., telephone workers. But substantial hiring was reported at new businesses in Sioux Falls, S.D., as well as Eau Claire and Menominee, Wis.
Agriculture
The 1992 harvest is complete with the exception of about 5 percent
of the corn in Wisconsin, Minnesota and the Dakotas and sunflowers
in North Dakota still unharvested at year end due to unfavorable
weather conditions. Overall, the crop was a record or near-record
one for most grain crops in the district.
Prices received by farmers were generally steady or lower than earlier in 1992 for most major commodities except wheat. Milk prices in dairy areas are down about three percent from the previous year.