Minneapolis Fed Forecasts Continued Expansion in the Ninth District Economy for 2005
Minneapolis, December 16, 2004— The Federal Reserve Bank of Minneapolis announced the regional economic outlook for 2005 during a media briefing today at the Minneapolis Fed. This forecast includes information from the Minneapolis Fed's statistical models and results from the annual business conditions outlook poll. The following forecast is available in detail in the January issue of the fedgazette.
- The district economy is expected to expand in 2005, according to the Minneapolis Fed's regional forecasting models and a poll of business leaders.
- Gains in employment and personal income are predicted across the district, while unemployment rates are not expected to change significantly.
- Housing units authorized are forecast to increase slowly in most district states.
- Wages are expected to increase modestly.
- The manufacturing and agricultural sectors had a strong 2004 and their representatives are optimistic for 2005.
District business leaders are the most optimistic since the survey began in February 1989. They are confident that the national and district economies will grow at an average to above-average rate in 2005. Respondents are optimistic about their community's economy, anticipating increases in employment, investment and consumer spending, though they see housing starts leveling off. At the same time, they expect average to above-average growth in inflation. Most of the respondents indicated that the results of the national elections will have a positive impact on their operations.
Agricultural Credit Conditions (Third Quarter)***
Agricultural credit conditions were solid, according to the Minneapolis Fed's third-quarter agricultural credit conditions survey. Most financial indicators revealed improvements in farm income, capital spending and loan repayments as well as increases in land values. Survey respondents expected this good news to flow into the fourth quarter, as they anticipate that their customers will increase borrowing to capture profit opportunities.
* Forecast from national and regional models developed by researchers at the Minneapolis Fed. The models use a statistical procedure called Bayesian vector autoregression.
** Key findings from 340 respondents to a November 2004 poll of business leaders in the Ninth Federal Reserve District.
*** Key findings from the Minneapolis Fed's third-quarter survey of 131 agricultural bankers in the Ninth Federal Reserve District.
As one of the 12 Federal Reserve Banks, the Federal Reserve Bank of Minneapolis contributes to a variety of Federal Reserve System functions, including operation of a nationwide payments system, distribution of the nation's currency and coin, supervision and regulation of member banks and bank holding companies, and serving as a fiscal agent for the U.S. Treasury. Additionally, the president of Minneapolis Fed serves as a member of the Federal Open Market Committee, the monetary policymaking arm of the Federal Reserve's Board of Governors. Together with its branch in Helena, Mont., the Minneapolis Fed serves the Ninth Federal Reserve District, which includes Minnesota, Montana, North and South Dakota, 26 counties in northwestern Wisconsin and the Upper Peninsula of Michigan.