WASHINGTON (MNI) – The following is the first part of the text of
the Minneapolis section of the Federal Reserve’s Beige Book report on
current financial conditions released Wednesday:

NINTH DISTRICT–MINNEAPOLIS

The Ninth District economy increased modestly since the last
report. Increased activity was noted in consumer spending, tourism,
residential and commercial construction, residential and commercial real
estate, professional services, manufacturing, energy and mining. Hiring
at district companies increased slightly, while wage pressures remained
generally subdued. Overall prices were steady with some exceptions
noted.

Consumer Spending and Tourism

Consumer spending grew moderately. A major Minneapolis-based
retailer reported that same-store sales in September increased over 5
percent compared with a year earlier. A manager at a Minneapolis area
mall reported that traffic in August and September has been busy, while
a mall manager in Montana said “back-to-school” traffic in August and
September was steady. A Minnesota bar and restaurant chain reported that
recent sales were up about 3 percent from a year earlier. A Minnesota
supermarket chain noted that consumers continued to trade downward from
high-end products to value-oriented products. Auto dealers in southern
Minnesota reported that sales were bouncing back to stronger levels;
consumers who put off purchases over the past couple of years are now
needing to buy a different vehicle. Fall tourism activity was up
slightly. The Minnesota State Fair in late August and early September
was the third-best attended in history, down 1 percent from the 2009
record. Fall tourism was on par with last year in western South Dakota,
according to an official. Meanwhile, a Minnesota travel agency reported
that recent corporate travel was up 15 percent from a year ago.

Construction and Real Estate

Commercial construction activity increased slightly since the last
report. The value of commercial building permits in September increased
from a year ago in the Sioux Falls, S.D., area. Commercial construction
in the Upper Peninsula of Michigan increased recently, according to a
labor official. In Minnesota, a telecommunications equipment provider is
building a large addition. In Montana, an agricultural supplier plans to
expand its research center. However, a survey by a Minnesota building
contractors association revealed a slight decline in activity over the
past month. Residential construction increased. A bank director noted
strong building activity in North Dakota. The value of residential
building permits in September increased from last year in the Sioux
Falls area. A large developer announced plans to build a $100 million
apartment tower in downtown Minneapolis. However, the value of
residential building permits in September decreased from last year in
the Minneapolis-St. Paul area. Commercial real estate markets were up
slightly. Respondents to a Minneapolis Fed ad hoc survey indicated a
slight increase in the need for additional space over the next three
months. A Minnesota venture capital firm that funds minority-owned
businesses noted an increase in purchases of vacant buildings. A large
broker of retail space in the Minneapolis-St. Paul area noted increased
leasing activity during the past two months. A broker for office space
reported that leasing activity has recently edged up. However, the
number of sales transactions was still low. Home sales in September were
up significantly from the same period a year ago in Minneapolis-St.
Paul. August sales in the Sioux Falls area increased from last year;
however, the median price of homes sold in August decreased from last
year.

Services

Professional business services firms reported increased activity
over the past three months. About half of services firms that responded
to the Minneapolis Fed’s ad hoc survey saw increased sales, while 27
percent saw decreased sales. Respondents noted that profits were also
up, and they expect increased activity over the next three months. A
Minnesota software company experienced double-digit revenue growth over
the past two months. A recent survey of 47 Minnesota architects and
engineers revealed increased activity over the past month.

Manufacturing

District manufacturing activity increased since the last report. A
survey of purchasing managers by Creighton University (Omaha, Neb.)
showed an increase in manufacturing activity in Minnesota and the
Dakotas in September. An ammunition producer is expanding its operations
in Minnesota. An industrial heater producer has expanded operations into
a formerly shuttered vehicle plant in North Dakota. In South Dakota, a
plastic sheeting producer is expanding its production facility, an
electronics producer opened a new plant and a new slaughterhouse should
be completed in November after a delay of several years.

Energy and Mining

Activity in the energy and mining sectors continued at a strong
pace. Late-September oil exploration activity increased from mid-August.
A company announced plans to begin working on a $300 million wind power
plant in southwestern North Dakota. District iron ore mines continued to
operate at near capacity. Activity at Montana mines remains strong,
driven by high metals prices, according to contacts.

Agriculture

Ninth District farmers are expecting smaller harvests this year,
but prices remain elevated. An early frost in late September may reduce
corn and soybean yields around the District. Recent dry weather has been
a boon to wheat harvesters, but overall wheat production in District
states is expected to be about 15 percent lower than last year,
according to U.S. Department of Agriculture estimates. Prices for corn,
soybeans, wheat, dairy products, poultry and hogs fell slightly since
the last report; cattle prices increased recently. In spite of these
recent declines, prices for many District agricultural commodities
remained well above their year-earlier levels.

Employment, Wages and Prices

Hiring at district companies increased slightly. A Minnesota firm
that provides automation technologies and services to the oil and gas
industries announced plans to add 100 workers. A bank will add 90
workers in Minnesota to deal with a surge in refinancing. A mine in the
Upper Peninsula of Michigan was having some difficulty hiring 90
additional workers. A North Dakota bus plant will add over 50 workers,
and a South Dakota health care record processing company will hire 20
new workers. According to a survey of construction-related firms in
Minnesota, 18 percent expect to increase hiring in 2012, while 33
percent expect to decrease hiring; nevertheless, these responses were
more optimistic than last year’s survey.

Wage pressures remained generally subdued. However, in North
Dakota, some wage increases were reported due to gains in hiring related
to the oil industry. Overall prices were steady with some exceptions
noted. Bank directors reported that generally companies were resistant
to increasing prices for their final products and services over the next
six months. Minnesota gasoline prices were down 40 cents per gallon in
early October compared with early September. However, some business
contacts reported recent increases in health care costs. According to
the Minneapolis Fed’s ad hoc survey, 45 percent of respondents indicated
that input costs were up from a year ago.

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

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