WASHINGTON (MNI) – The following is the text of the Federal
Reserve’s Beige Book survey Ninth District summary, published
Wednesday:

Since the last report, economic growth in the Ninth District has
picked up somewhat. Consumer spending, tourism, services, manufacturing,
energy, and mining saw increases. Activity in the commercial and
residential real estate sectors decreased, while commercial construction
remained weak. Meanwhile, residential construction was mixed and
progress in the agriculture sector slowed. Labor markets showed some
signs of picking up; however, overall weakness continued. Wage increases
were moderate, and overall prices remained relatively level.

Consumer Spending and Tourism

Consumer spending grew moderately. A major Minneapolis-based
retailer reported that same-store sales in September were up about 1
percent compared with a year earlier. September traffic at a North
Dakota mall was up over 10 percent from a year ago, which was a surprise
following a slight decrease in August, according to the mall manager.
Cooler fall weather seemed to attract shoppers. August sales were up
over 10 percent at a Montana mall after a few consecutive months of
small gains. August sales were up slightly from a year ago at a
Minneapolis-St. Paul area mall. A restaurant chain noted that sales were
up 3 percent during August and September from a year earlier. However, a
Minnesota-based clothing retailer noted slow uptake of new merchandise
offerings; it expects low single-digit increases in same-store sales
over the next few months. September car sales in Montana were mixed,
according to a representative of an auto dealers association.

Tourism activity was up from a year ago. Rooms sold at Montana
hotels were up almost 11 percent in August from a year earlier,
according to a state tourism research organization. A tourism official
in the Upper Peninsula of Michigan noted that the summer season finished
well ahead of a year ago and that fall traffic seems to be holding up.
Minnesota lodging and campground operators noted increases in summer
business from a year earlier and were more optimistic for fall tourism
than a year ago, according to the results of a state survey. In
addition, attendance at the Minnesota State Fair almost reached last
year’s record high.

Construction and Real Estate

Commercial construction was slow. A District manufacturer of
commercial building materials said demand was slowing. The value of
nonresidential permits in Sioux Falls,

S.D., fell dramatically in September from a year earlier; in
contrast, September commercial permits increased substantially in
Rochester, Minn. Residential construction was mixed. The value of
September residential permits increased 70 percent and 40 percent,
respectively, in Fargo, N.D., and the Minneapolis-St. Paul area from a
year ago. Meanwhile, residential permits fell 78 percent and 38 percent
in value in Rochester and Sioux Falls, respectively.

Commercial real estate remained weak. In Minneapolis-St. Paul,
about 20 percent of office space and 8 percent of retail space sat
vacant in August. A commercial real estate broker in Fargo, N.D., said
activity there was flat at low levels. Residential construction showed
signs of stagnation. August closed home sales in Minneapolis-St. Paul
fell almost 9 percent from a year earlier while prices decreased nearly
2 percent. In contrast, residential real estate contacts in Bismarck,
N.D., described market activity there as busy.

Services

Activity in the professional business services sector increased
since the last report. Appraisers and title companies reported continued
strength during September. We are swamped with great projects,
commented a design and advertising firm. Information technology
consulting firms noted solid interest from corporate clients. Contacts
from firms that advise small businesses on mergers and sales noted
less-than-robust growth during the past month. Some architects reported
a surprising increase in activity: We’ve weathered the storm and now
find ourselves in calm waters, commented a large architectural firm.

Manufacturing

Manufacturing output was up since the last report. A September
survey of purchasing managers by Creighton University (Omaha, Neb.)
showed strong increases in manufacturing activity in Minnesota and South
Dakota, and slight increases in North Dakota. In Montana, a food
processing company is expanding operations and a jet engine plant plans
to build a facility. In Minnesota, a fishing tackle company recently
experienced a big pickup in demand, a metal fabricator saw increased
orders, a dental part maker noted increased sales and a bed
manufacturer’s recent sales were up and higher than anticipated.

Energy and Mining

Activity in the energy and mining sectors increased since the last
report. Late-September oil exploration increased slightly from
late-August. New wind energy projects are planned in the Dakotas. Most
District mines were operating near capacity. Iron ore production in
Minnesota increased in August compared with July. A Montana copper miner
noted that we have been doing very well, and the short-term outlook
was very positive.

Agriculture

Agricultural activity slowed due to wet weather. District crops
were relatively large and in good condition. However, the cereal grains
harvest in Montana was behind the pace of last year. Widespread wet
conditions delayed some farmers from harvesting their bountiful crops.
In addition, large amounts of rain in late September flooded rivers and
saturated farmland from eastern South Dakota through western Wisconsin.
Meanwhile, prices remained robust for many District agricultural
products.

Employment, Wages and Prices

Labor markets showed some signs of picking up; however, overall
weakness continued. A department store chain with locations in Minnesota
noted that it expects to increase seasonal hiring, while another large
retailer will soon open a store in Minnesota with plans to hire about
130 employees. A manufacturer in northwestern Wisconsin noted an
increase in hiring due to stronger orders. Minnesota initial claims for
unemployment insurance were down 20 percent in September compared with a
year earlier. According to respondents to a recent St. Cloud (Minn.)
Area Business Outlook Survey, 19 percent expect to increase staffing
levels at their companies over the next six months while 20 percent
expect to decrease staff. In last year’s survey, 15 percent expected to
boost hiring while 24 percent anticipated decreases. In contrast, a
Minneapolis-area hospital recently announced plans to lay off 200
employees.

Wage increases remained modest. For example, a county government in
the Minneapolis-St. Paul area will award most nonunion employees a 1
percent raise.

Overall prices remained level. Minnesota gasoline prices were
relatively stable since the last report. Residential natural gas prices
were only about 5 percent higher than a year ago. However, scrap metal
and plastic resin prices increased since the last report.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$$CR$,M$U$$$,MMUFE$,MGU$$$,MFU$$$]