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AFTERMATH OF 1993 FLOOD: URBAN ECONOMIES IN GOOD SHAPE, FARM PROBLEMS MANAGEABLE

 MINNEAPOLIS, Nov. 15 /PRNewswire/ -- Despite significant crop losses, the Upper Midwest's regional economy continues to outperform the national economy, according to Dr. Sung Won Sohn, chief economist for Norwest Corporation (NYSE: NOB).
 "Most urban bankers in Norwest's eight Upper Midwest bank states see little fall-out from this year's adverse weather," said Sohn. "Nonurban bankers are less optimistic about economic prospects, saying the full impact of this year's crop failure won't be felt until next spring and summer. However, not all rural areas will be hurt." About 40 percent of bankers from North Dakota, Nebraska and Wisconsin projected a negligible or positive effect from this year's weather conditions.
 The number of farmers experiencing negative cash flow will rise significantly in portions of the region, causing increased loan restructuring and forcing some farmers to substantially liquidate assets. However, farm stress isn't expected to be nearly as severe or as widespread as in the mid-1980s. Today's low interest rates, more moderate debt levels, government disaster assistance, lower land costs and stronger livestock earnings spell the difference. Also, some farmers harvested record crops this year. Moreover, the mid-1980s farm problems were structural in nature, built up over a period of years. This year's decline in the farm economy is flood related and will be temporary.
 Sohn's remarks come with the release of Norwest's 35th semi-annual survey of 1,000 bankers in Iowa, Minnesota, Nebraska, North Dakota, South Dakota, Wisconsin, Illinois (Galesburg and Peoria), and Indiana (Fort Wayne and South Bend). Dr. Larry J. Wipf, Norwest's director of regional economics, and economist Kevin SigRist, prepared the results.
 Urban Bankers Upbeat
 Bankers in towns with more than 10,000 people reported that poor weather conditions have had little adverse affect on the economy. About 64 percent rated current economic conditions good, 35 percent fair and 2 percent poor. These results are only slightly lower than last spring.
 One-third of all urban bankers anticipate moderately better economic conditions in the next six months while only 5 percent predict moderatly worse conditions. The greatest economic improvement was forecast by urban bankers in Iowa, Wisconsin, South Bend and the Minneapolis-St. Paul metropolitan area.
 Although Twin Cities bankers expect moderately stronger conditions in upcoming months, they expressed uneasiness about higher federal taxes and health-care reform. However, the Twin Cities medical community appears to be ahead of the nation in adjusting to the reality of health- care reform. There have been several of mergers and alliances among area health care providers. Housing, services and retail sales were the highest rated sectors in the Twin Cities, the weakest were manufacturing and commercial real estate. General merchandise, apparel and furniture sales were up nearly 13 percent through August, the first anniversary of the opening of the Mall of America.
 Other survey results are:
 -- Nebraska -- urban bankers gave the economy high marks. Housing scored well followed by retail sales, manufacturing and farming. Non- farm employment growth has been relatively flat. Construction and durable-goods manufacturers showed the most strength, while service- sector jobs lagged.
 -- North Dakota -- Ninety-two percent of urban bankers scored economic condition good to very good, capturing the highest rating in the Midwest region. Housing starts should hit a nine-year high this year. Bankers projected a continued robust economy; adverse weather in 1993 is expected to have a minimal impact on business activity.
 -- South Dakota -- Nonfarm employment growth has been stellar, led by continued large gains in durable-goods manufacturing, finance, insurance and tourism. The housing market received especially strong marks. Bankers anticipate little change in South Dakota's economic growth in the coming months.
 -- Wisconsin -- Seventy-four percent of urban bankers rated current conditions good, a respectable improvement from the spring survey. Construction employment was up 13 percent in September and, with the exceptions of Madison and Racine, new home construction is only slightly lower than last year's strong levels. Wisconsin's stable manufacturing payroll compares favorably with national trends. Appleton-Oshkosh- Neehah, Green Bay and Madison will continue to outpace state job growth in 1994.
 -- Peoria, Ill., -- Bankers rated the economy good with retail sales and the housing market the top scorers. Bankers also reported that commercial development and construction are experiencing the highest level of activity in years. Bankers were optimistic about 1994 economic prospects. However, since the survey was conducted, workers walked off the job at Caterpillar. This action will dampen economic activity if the labor dispute drags on for a prolonged period of time.
 -- Indiana -- While Fort Wayne bankers gave current economic conditions the lowest score in the survey, no one responded with a rating worse than fair. Housing, services and retail sales were the highest-rated sectors. Fort Wayne should show modest job growth of one percent this year, but growth may ebb in 1994. A Uniroyal/Goodrich tire factory is likely to close in 1994, eliminating up to 2,100 jobs.
 Nonurban Appraisals Slip: Impact of Flood Varied
 Bankers from towns of 10,000 or less gave the economy lower marks than last spring as heavy rains and cool weather slashed crop production. But, economic conditions varied across the region. Iowa and Minnesota appraisals declined the most while Nebraska and Wisconsin slipped only modestly, North Dakota's scores were unchanged while South Dakota's rose slightly.
 Thirty-nine percent of the bankers rated the economy good, outdistancing the 12 percent that rated the economy poor. Wisconsin bankers topped the list (61 percent good versus 3 percent poor) while Minnesota's marks were the lowest (28 percent good, 48 percent fair and 24 percent poor).
 Bankers were asked to measure the impact of this year's adverse weather conditions. The majority of bankers felt the adverse summer weather would have a moderately negative impact on business activity in the coming months. Iowa and Minnesota bankers were the least optimistic. Sixteen percent of Minnesota bankers projected a severe and 60 percent a moderately negative impact. Comparable figures for Iowa were 12 percent severe and 71 percent moderate. Other states were less affected. The number of bankers projecting a severe negative impact on business activity was as follows: Nebraska 9.4 percent; North Dakota 7.9 percent; South Dakota 6.8 percent; and Wisconsin 3.8 percent.
 Farm Credit Problems Rise But Manageable
 Bankers also estimated that an average of 22.5 percent of their farm borrowers will experience negative cash flow this year, the median response was 13 percent. These figures are well above year-ago levels, but not as severe as during the farm crisis of the mid 1980s.
 Minnesota bankers estimate that one-third of their farm borrowers will have negative cash flow this year. Iowa had the next largest percentage of bankers expecting farm borrowers to have negative cash flows (25 percent) followed by South Dakota's 15 percent. Nebraska, North Dakota and Wisconsin were all clustered around 14 percent. However, significant intra-state variation exists. For example, one- fourth of the Minnesota bankers estimated that half of their farmers would have negative cash flow. Another quarter felt 10 percent or less of their customers would have negative cash flow.
 Bankers also estimated that about 4.3 percent (median 2 percent) of the farm borrowers would be forced to liquidate assets significantly due to weather-related losses. However, one-fourth of the bankers said none of their customers would have to liquidate assets, while another one- fourth felt that at least 5 percent of their farm borrowers would have to significantly liquidate assets. Once again, Minnesota and Iowa figures tended to be higher than the survey average.
 Overall, these estimates appear to be less severe than during the farm crisis in the mid-1980s. Most bankers said that they expected only a limited number of farmers to go out of business, but intermediate and long-term debt restructuring will take place. Bankers projected that, on average, 71 percent of their farm borrowers will be able to service all debt as agreed (including term debt). The median response was 80 percent.
 Norwest Corporation is a $50.4 billion company providing banking, insurance, investments and other financial services through 2,279 offices in all 50 states, all 10 Canadian provinces and internationally.
 -0- 11/15/93
 /CONTACT: Dr. Sung Won Sohn, 612-667-7498, or Dr. Larry Wipf, 612-667-9281, both of Norwest/
 (NOB)


CO: Norwest Corporation ST: Minnesota IN: FIN SU:

AL-DS -- MN015 -- 4413 11/15/93 12:23 EST
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Date:Nov 15, 1993
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