87 posts categorized "South Dakota"

District businesses expect to increase capital spending in 2014

Capital spending is an important benchmark for the economy and its expected trajectory going forward. In the Ninth District, a recent survey suggests a positive outlook.

The Federal Reserve Bank of Minneapolis conducted an ad hoc survey of 153 Ninth District firms (see methodology) and asked them about capital spending plans. About half noted no change for 2014, but 31 percent expect capital spending to increase compared with 19 percent who expect decreases.

Financial and health services respondents are the most optimistic, with more than 40 percent anticipating capital expenditure increases next year. In contrast, 44 percent of manufacturers expect cuts in cap ex, while a third expect increases in 2014 over 2013.

Firms that are expanding capacity are most often facing capacity constraints. The most common reason given for expansion was that current capital equipment is not well suited to future needs (42 percent), followed by 40 percent who said current capacity is already stretched too thin. One-third of the positive respondents noted improved sales prospects. Respondents could choose more than one reason.

Of those who expect to cut capital expenditures, the most common reason cited (by about half of respondents) was reduced sales, while 31 percent mentioned cost increases as a limiting factor, and current excess capacity was blamed by 23 percent of the respondents. Again, respondents could choose more than one reason. Other reasons given were uncertainty in health care costs and government funding and a changing environment. Uncertainty about the future is curtailing capital spending now, according to 53 percent of respondents.

The number one issue respondents cited for why there is uncertainty is the strength of the overall recovery (73 percent) followed by uncertainties regarding health care reform (57 percent). Only 7 percent noted weakness abroad as an uncertainty issue. Examples given in written comments include interest rates, lack of political leadership and government policy.

Survey methodology: At 8 a.m. on Thursday, Oct. 31, an email was sent to 1,000 business contacts from various sectors around the Ninth District. By 4 p.m. Friday, Nov. 1, we received 153 responses, representing a 15 percent response rate. The largest number of respondents came from professional services (21 percent), financial services (18 percent), manufacturing (14 percent) and government (11 percent).

After snowstorm, ranchers still surveying damage

Ranchers in the western Dakotas who were hit hard by a freak fall blizzard got some welcome news Tuesday—they can get some assistance from the federal government while they wait to find out if more aid is on the way.

For readers who are unfamiliar with the story, a little background: In early October, Winter Storm Atlas dumped several feet of snow on some parts of South Dakota, North Dakota, Montana and Wyoming. The storm came on the heels of heavy rains that left grazing lands a muddy mess, and many cattle were left exposed to a quick freeze and extremely high winds before they had a chance to grow thicker winter coats.

Reliable estimates of the number of cattle killed due to freezing, drowning or trampling aren’t available yet, but early estimates suggest that the number is easily in the tens of thousands. Anecdotal reports indicate that the devastation varied widely; some ranchers were barely affected, while others may have lost their entire herds.

The damage assessment itself has been complicated and delayed by muddy conditions created by melting snow. Immediately after the blizzard, South Dakota Gov. Dennis Daugaard announced an executive order waiving the standard requirement that ranchers dispose of carcasses with 36 hours under normal conditions. That waiver was set to expire on Friday, but was extended this week until the end of November.

Ranching is big business in the region—South Dakota is the nation’s fifth largest beef producer, and the state has five cattle for every one person. Grown cattle sell for $1,400 to $2,000. Added to cattle losses are the cost of cleanup and losses due to animal injury or sickness, all which will have a major economic impact on the state.

The other tough part about the timing of the storm is that it came during the federal government shutdown, delaying any action on a possible disaster declaration. In addition, funding for livestock disaster relief programs has expired because of the holdup over the passage of a federal farm bill.

However, on Tuesday USDA Under Secretary Michael Scuse announced that ranchers can apply for assistance under the Environmental Quality Incentives Program, a conservation subsidy that will help them pay for carcass removal and infrastructure repair.

This story will continue to develop as the extent of the destruction becomes clearer. The fedgazette Roundup will be following it, so expect updates in the future.

Housing recovery? Let’s say “improvement”

In the rush to put the bad days of recession and slow recovery behind us, there are many news accounts of recovering housing markets. But recovery is a matter of economic context. Recovered compared to what? Housing sales, prices and construction have all been rising of late, but it helps to see the path recently taken.

Through August of this year, for example, Ninth District states have seen single-family housing permits rise by 22 percent over the same period a year ago, just a tick off the national average of 24 percent. Performance of individual states ranged from North Dakota (9 percent growth) to Montana (37 percent). North Dakota’s modest growth belies surging growth in housing; the state didn’t have near the drop in permits experienced by other states during the recession and is currently at record levels, having seen strong annual growth since 2009.

But North Dakota aside, permits fell so far during the recession that it’s hard to deem the most recent period a recovery. In 2004, for example, almost 21,000 single-family housing units were authorized in Minnesota through August of that year—the most ever at the time or since. By 2009, it was barely 4,000. This year, it’s back up to more than 7,000 so far through August. That’s certainly an improvement, but not likely back to full health.

Part of the problem is not knowing what a healthy housing market looks like. Post-recession, it would appear that the pre-recession housing boom was not normal or healthy. And if that’s the case, then a full recovery might not be as far off as pre-recession permit levels might suggest.

Building permits thru August -- 9-26-13

Little GDP engines that could: District metros see strong growth

Metropolitan regions now account for more than 90 percent of the nation’s gross domestic product (GDP), according to the Bureau of Economic Analysis. Given their economic and geographic diversity, metros offer a more detailed look at growth across states and the nation—one which shows that metros in the Ninth District are generally seeing faster growth.

Nationwide, 305 of 383 metropolitan regions (80 percent) saw economic growth in 2012. In the Ninth District, 13 of 15 metros grew last year, or almost 87 percent, and two of three district metros beat the national average of 2.5 percent (see left chart). A large region encompassing much of the lower half of Minnesota—including the Twin Cities, St. Cloud, Rochester and Mankato metros—saw growth over 3 percent (see map, at bottom).

But as has become the norm, North Dakota metros were leading the metro pack, with Bismarck at the top at 8.5 percent growth last year, one of the top rates in the country. The region is seeing spillover effects from strong growth in the Bakken oil shale region to the west. Other shale regions are also seeing explosive growth; in the Eagle Ford oil shale region of Texas, the metros of Midland and Odessa both saw growth of 14 percent.

There were two district metros whose economies shrank last year: Duluth, Minn., and Great Falls, Mont. The source of contraction is hard to determine exactly. In the case of Duluth, the city and broader region experienced a major flood in June, which likely dampened economic activity, particularly tourism; the previous two years it had experienced annual growth near 3 percent.

Last year’s growth among district metros continued a general trend in outperforming metros elsewhere. Over the previous three years, 11 of the district’s 15 metros had faster annual growth than the national average (see right chart).

GDP of metros -- CH1-2

GDP metro MAP - 9-18-13

Manufacturing outlook: U.S. catching up with Ninth District

It took all summer, but the nation’s manufacturers appear to have finally caught the sector’s good vibe already present for the better part of a year in three Ninth District states.

The Mid-America Business Conditions Index, put out monthly by Creighton University, shows that the overall outlook of manufacturers in district states where the poll is conducted continues to be upbeat, with Minnesota scoring the highest at 59 (above 50 indicates expansion, and below 50 indicates contraction). After declining steadily through the first half of the year, the overall U.S. score turned notably upward in July and August, ending at almost 56.

Employment sentiment has been more volatile, especially in the Dakotas, where the manufacturing base is comparatively small but reaping the benefits of strong state economies. U.S. employment sentiment has risen almost to the level of district states, which have declined of late, with all scores falling between 53 and 55.

Mid-America -- September survey -- 9-11-13

Higher ed enrollments leveled off last year in district states

As college students head back to school, administrators will have their clickers out taking head counts in hopes of keeping classrooms full, but not too full.

Statewide enrollment data are often not released publicly until the following summer (or, in some cases, at the request of the fedgazette). These data show that 2012 was a bit of an enrollment breather for colleges and universities throughout the district. Last year, undergraduate enrollments across public college and university systems fell in three of five district states (see Chart 1). Graduate enrollments also dropped last year in three states (see Chart 2).

Higher ed CH 1-2 -- 8-29-13

Despite the pause in growth, enrollments have grown significantly since 2008, particularly in the Dakotas and Montana. Enrollment growth is even more pronounced over the past decade; South Dakota, for example, has seen undergraduate and graduate enrollments increase about 20 percent since 2003. North Dakota’s graduate population is up by 54 percent over the same period.

Since the recession, 2-year schools have seen the strongest growth in many states, including Minnesota (see Chart 3). But that’s not the case everywhere. The 13 percent increase in students at North Dakota’s 2-year schools was outstripped by head counts for 4-year undergraduates (24 percent) and graduate students (20 percent).

Higher ed CH 3 -- 8-29-13

Two-year enrollments are also slipping in some states. Wisconsin saw 20 percent enrollment growth of full-time-equivalent students at its popular technical colleges from 2005 to 2010, topping 82,000. But FTE enrollment in 2011 dropped by 5 percent. (Fall 2012 figures were not available, according to system officials.) 

But nowhere are the numbers more bleak than for private career (or trade) schools (see Chart 3). These programs have been hard hit by the recession, comparatively high tuition and rising student loan levels (read more about these topics here). In Minnesota, enrollments in 2-year career schools peaked in 2009 at 36,700, only to fall by more than 11,000 students by the fall of last year.

William Thomas, fedgazette intern, contributed data for this article.

Newborn businesses crawling again, jobs not following in tow

It’s well known that starting a business is tough. New data on establishments suggest that entrepreneurs are starting to regain their appetite for risk after getting scared to the sidelines during the recession and slow recovery.

According to figures from the U.S. Census Bureau, the annual number of establishments that are less than one year old has been slowly rising. While still not above prerecession levels across Ninth District states, all states saw positive growth in 2012; for most, it was the second consecutive year (see Chart 1). For North Dakota, it was the second straight year of record new establishments.

New establishments Ch1 -- 7-31-13

It’s also well known that these young businesses are an important source of employment because young companies tend to be growing and thus require more labor compared with older companies (for those who need convincing, see the July 2011 fedgazette). Jobs have been rising at these young establishments, but the overall track record is a little less consistent and upbeat. For most district states, last year was the first real year of solid job growth (see Chart 2). These jobs declined last year in Wisconsin, its trend line zig-zagging since 2009 along with Minnesota’s.

New establishments Ch2 -- 7-31-13

Annual job levels are still well below prerecession levels in four states. That’s because average employment at these young establishments has been going down steadily (see Chart 3). Minnesota’s average employment has gone down by one and a half workers since 2007; Wisconsin and South Dakota saw a drop of almost one worker.

The exception to all the job trends is North Dakota, whose economy is the best in the country and comparable to almost no other state right now. Last year, both new establishments and total jobs at these businesses outstripped those of Montana, whose population is more than 40 percent larger. North Dakota even saw small growth in the average number of jobs per young establishment between 2007 and 2012.

New establishments Ch3 -- 7-31-13

City employment: Help wanted, maybe

While the evidence is modest, there are small signs of recovery in public employment, at least among some larger Ninth District cities.

Public employment is typically quite stable over time. During the Great Recession, it lagged the downward spiral of private employment thanks largely to the federal stimulus of 2009. Once those funds to local governments were spent, employment levels started falling across the nation and district and continued through 2012 (see January fedgazette for more discussion).

With many public budgets now rebounding, or at least getting out of serious deficits, some local governments appear willing to entertain the idea of adding staff. Employment figures were investigated for larger cities in the Ninth District with employment levels over 200 (the list is not exhaustive, as not all cities post recent budgets or employment figures online).

Among 20 cities with available data, employment estimates for fiscal year 2013 show the job bleeding has stopped, at least temporarily, and for some (see Chart 1). The combined employment of the 20 cities grew 0.4 percent—70 jobs—in FY2013 compared with a loss of about 275 jobs over the previous two fiscal years. Bismarck, N.D., saw easily the highest job growth, at 4.2 percent, but eight other cities saw modest growth, including both Minneapolis and St. Paul.

But it appears that many local governments are not quite out of the fiscal woods yet. Two cities saw no growth, and the balance of 18 cities was split evenly between positive and negative job growth in FY2013 (see Chart 2). Grand Forks, N.D., took the biggest hit, as city employment dropped 1.4 percent, according to city budget figures.

William Thomas, Minneapolis Fed intern, contributed data to this report.

  City employment charts 1-2 -- 7-23-13png

 City employment table (2) -- 7-23-13

Ninth District manufacturing continues expansion ahead of nation

While manufacturers nationwide continue in something of a holding pattern according to recent surveys, manufacturers in three Ninth District states continue to see growth, according to a monthly survey of supply managers by Mid-America Business Conditions Index, published by Creighton University.

The May survey showed overall sentiment in Minnesota and the Dakotas mostly holding in the mid-50s (an index score over 50 indicates growth; below 50, contraction). The index for employment remained in growth territory but saw both positive and negative change from April in the three states (see charts). The overall index for the nation turned negative (at 49), while employment sentiment teetered on the growth fence (50.1).

The Dakotas are taking turns grabbing headlines. In May, South Dakota saw very strong growth in overall sentiment as well as for employment, while its northern neighbor declined marginally on overall sentiment and continued a volatile pattern in employment. Ernie Goss, director of Creighton's Economic Forecasting Group, said that wages have grown very strongly in North Dakota manufacturing, and “nondurable goods manufacturers, especially food processors, are experiencing very healthy growth. On the other hand, durable goods manufacturers are experiencing pullbacks in economic activity.”

Mid-America June survey -- 6-5-13

District tourism hopes upward trend continues

With summer travel around the corner, many Ninth District businesses hope they can improve on 2012’s good-to-great tourism year, according to data from state tourism offices and university research centers in district states.

District states that track visitors or lodging stays reported 2012 increases across the board (see chart, at bottom). Gains were larger in Montana and especially North Dakota, where total visitors increased by 7 percent. South Dakota did not publish annual figures for visitors or spending change over the previous year, but reported that state park visitation last summer was up by 8 percent. North Dakota saw the same trend, with national park visitation there up 13 percent last year. Canadian border crossings were also up 8 percent.

States that track visitor spending saw it increase faster than visitor numbers. Wisconsin tourism spending grew by almost 5 percent last year, while Montana tourists were feeling particularly flush, spending 15 percent more in 2012 than the previous year. While Minnesota’s total lodging demand increased by 1.4 percent, total lodging revenue rose by 3.7 percent.

Higher visitor spending has been a consistent trend for several years, as tourists have found their wallets again after the recession. In Wisconsin, visitor spending has grown by 25 percent since 2009, to $10.4 billion. Montana has seen even stronger spending growth (40 percent) over the same period. However, the state experienced a steep downturn in visitor spending from 2007 to 2009, and last year’s $3.2 billion in spending finally reached above the state’s previous peak ($3.1 billion) in 2007.

Some positive early signs for the 2013 season are already evident. Early projections in Montana for the 2013 season were pegged at 2 percent growth of nonresident visits, and a 4 percent increase in spending. In Minnesota, lodging demand grew by 4.3 percent in the first quarter of this year compared with the same period in 2012.

Tourism 2012 -- 5-10-13

 

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