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

NINTH DISTRICT–MINNEAPOLIS

The Ninth District economy grew slightly since the last report.
Consumer spending, tourism, manufacturing, energy, mining and
agriculture saw increases. Residential construction and the services
sectors experienced mixed activity, while commercial construction
remained weak. Commercial and residential real estate activity
decreased. Labor markets continued to strengthen somewhat. Wages were
generally level with a year ago, and price increases remained
restrained.

Consumer Spending and Tourism

Consumer spending increased modestly. A major Minneapolis-based
retailer reported that same-store sales in June were up almost 2 percent
compared with a year earlier. A mall manager in North Dakota noted that
recent sales were up 4 percent over last year and were running a little
ahead of 2008, when activity was relatively strong. In South Dakota, a
mall manager noted that recent sales were mixed; consumers remained
cautious as traffic continued to be driven by promotions. A Montana auto
dealer noted that June sales were behind a year ago, but July sales have
picked up substantially.

Summer tourism was up slightly from a year ago. Representatives of
South Dakota tourism businesses and attractions noted that the early
part of the summer season was going well. In western Montana, hotel
bookings were about the same as a year ago, while Glacier National Park
is expected to have a record year due to its 100th anniversary
celebration. Tourism activity in the Upper Peninsula of Michigan was
about the same as last year. Meanwhile, a Minnesota travel agency noted
that corporate sales were up about 20 percent during June and early July
compared with 2009.

Construction and Real Estate

Commercial construction remained weak. A commercial contractor in
Montana said that the number of projects up for bidding decreased;
existing projects were smaller and had more bidders. In contrast, a
heavy infrastructure contractor in Minnesota and Wisconsin saw
improvement in its market segment. In addition, the value of June
commercial permits in Sioux Falls, S.D., nearly doubled from the
previous June. Residential construction was mixed. June residential
permits increased slightly in value for the Minneapolis-St. Paul area
and for Fargo, N.D., compared with the same month a year earlier.
However, residential permits decreased substantially in value in Sioux
Falls and Rochester, Minn.

Weakness remained in the commercial real estate sector. Office
vacancy increased in Minneapolis-St. Paul. A commercial real estate
broker in western Montana characterized the market as level with last
year’s slow activity. Residential real estate activity softened
slightly. The number of closed sales in Minneapolis-St. Paul decreased
in June from a year earlier. A real estate agent in Fargo said activity
was steady, but not as active as usual for this time of year. Meanwhile,
a Realtor in northeastern Minnesota recently noticed an increase in
inquiries for properties.

Services

Activity in the professional business services sector was mixed
since the last report. An engineering firm that supports the mining and
energy sector noted an increase in activity. A human resources
consulting firm noted a slight uptick in new business. Architectural
firms reported slow demand. Information technology consultants reported
that business was flat with a lot of maintenance projects rather than
new software development. A firm that assists nonprofits noted a slight
decrease in activity. A Minnesota energy management consultant noted an
increase in orders.

Manufacturing

Manufacturing output was up since the last report. A June survey of
purchasing managers by Creighton University (Omaha, Neb.) showed that
manufacturing activity increased significantly in Minnesota and the
Dakotas. A construction equipment manufacturer in North Dakota was
increasing production. A South Dakota wind energy equipment producer
increased production significantly due to increased demand.

Energy and Mining

Activity in the energy and mining sectors increased since the last
report. Mid-July oil exploration increased from early June. Wind energy
projects have come online, and more are planned in the western portion
of the District. In Montana, a company applied for permits to develop an
underground gold mine. A Montana copper mine was “doing excellent,”
according to an official, due to strong production and prices. However,
iron ore production in Minnesota decreased in June compared with May
because of maintenance at one of the mines.

Agriculture

Agricultural activity increased. The U.S. Department of Agriculture
raised the price estimates for corn, soybeans and wheat. The vast
majority of the District corn and soybean crops were rated as either
good or excellent. Meanwhile, drought conditions eased across most of
the District, but some areas were experiencing excess moisture.

Employment, Wages and Prices

Labor markets continued to strengthen somewhat. According to
respondents to a recent St. Cloud (Minn.) Area Business Outlook Survey,
28 percent expect to increase staffing levels at their companies over
the next six months, while 9 percent expect to decrease staff. In last
year’s survey, 19 percent expected to boost hiring, while 12 percent
anticipated decreases. A recent survey of businesses conducted by the
North Dakota Chamber of Commerce showed that 39 percent expect to
increase staffing in the next six months; the majority of respondents
expect to keep payrolls level.

Increases in temporary employment were noted. A representative of
an employment services firm in Minneapolis-St. Paul reported that demand
for temporary workers has continued to grow during the past two months.
In the Dakotas, demand for seasonal construction employment was up;
however, temporary construction and manufacturing employment was slow in
the Duluth, Minn., area, according to bank directors. In northwestern
Montana, two employment offices reported that postings for temporary and
part-time listings were up; however, overall job orders by employers
were down 50 percent compared with a year ago. Signs of continued
weakness also include an announcement that a bank will lay off about 80
employees in Minnesota.

Wages were generally level with a year earlier. Over 70 percent of
respondents to the St. Cloud survey expected no changes in employee
compensation over the next six months. A nurses union and 14 hospitals
in the Minneapolis-St. Paul area agreed on a contract that averted an
open-ended strike; pension and health benefits were not changed. Price
increases remained restrained. Minnesota gasoline prices at the
beginning of July were about the same as prices a month earlier. Bank
directors noted that prices have remained generally level for area
businesses with some exceptions. Significant increases included copper
and brass products in electrical wiring, steel fencing materials and
unemployment taxes. Scrap metal prices were above year-ago levels, but
dropped during the past month.

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

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