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Retail Sales Still Weak; A Hint of Recovery on Floyd B. Olson Highway

July 16, 2009 By Lee Egerstrom, Economic Development Fellow
The retail sales figures released Tuesday by the Department of Commerce don't tell us much about the U.S. economy, but there are hints that the rural Minnesota economy, at least, may be turning.

Call this the Floyd B. Olson Memorial Highway Index of Leading Indicators, if you need an uptown-sounding reference. But there are some positive signs on the rural front.

A lot of deferred maintenance on homes in west central and northwestern Minnesota is now being addressed, especially the refinishing of log homes, said David Jensen of Valley Woods at Wendell, Minn.

There's been an upsurge in new members joining Lions Clubs International. That, too, is an indication more people are moving beyond worrying about the sustainability of their businesses or jobs, Jensen said.

What's more, the guy who lives across the street from Valley Woods and makes cinnamon rolls for the woodworkers and cabinetmakers' mid-morning break "is getting pretty ornery.

"So yah, add it up and I'd say there are signs we're getting back to normal," Jensen said. "It isn't a recovery yet, but business is picking up and getting better."

At least, that appears to be the case through the communities along the Floyd B. Olson highway that roughly parallels Interstate 94 from the Twin Cities to border communities of North Dakota.

Valley Woods makes furniture that is mostly sold at furniture and home stores from Fargo to the Twin Cities. That business is still off, Jensen said, but it is picking up a bit as retailers find a slight uptick in the market for mid-range priced furniture.

Refinishing log homes and upgrading wood interiors has kept Jensen and his three to four full-time employees hanging on for the past 18 months of the recession. That is an extension of the construction industry that remains weak but appears to be improving in the lower Red River Valley, he said. His brother, who operates Jensen Builders at Wendell, is finding an improved market for new home construction in the Fargo, Fergus Falls and Elbow Lake area and at surrounding lakes in recent months.

Making cabinets, tables and benches, which are sold through retailers, was the primary business at Valley Woods until the current recession. Now it's only about 5 percent of the company's revenue.

Jensen's experience reflects that much of rural Minnesota didn't have as severe a recession cycle as most of America or the state. To the extent that part of his business is supplying retailers in urban areas, however, his observations are consistent with the Commerce Department retail data announced this week.

Retail sales in total rose 0.6 percent in June, when analysts were expecting a mere 0.4 percent increase. That was no sign of a recovery by itself, and especially because higher gasoline prices in June were a driver for the increased retail sales. Gas prices accounted for about half the month's sales gain.

Since gasoline prices in July have been coming down, motorists won't be giving a lift to retail data for the current month. Andrea Chang, writing for the Los Angeles Times on July 10, looked at weak June retail sales across all industry sectors. That, she wrote, had industry analysts worried about a July pickup from back-to-school sales.

Some of the nation's largest clothing and general merchandise chains had June same-store sales drop by as much as 32 percent from the same month a year ago (Abercrombie & Fitch), while Minneapolis-based Target Corp. had same-store sales drop a more modest 6.2 percent.

There was some improvement reported for electronics retail sales. That is important for the state as well, given that Minnesota-based Best Buy is also a major employer at stores and its headquarters. Target and Best Buy are especially important to Minnesota given their presence and charitable work in the state.

Against uncertain market signals from retailers, however, the early indicators from Wendell's woodworkers take on regional significance.

Jensen was recently elected the district governor-designate for the Lions district that entails much of western Minnesota at the organization's international gathering in Minneapolis. He's to be elected district governor next year at the Lions' gathering in Sydney, Australia.

"We've got 13,000 new members worldwide," he said. "That's got to be a good signal for the global economy."

Closer to home, a retired state and federal public servant across the street is reaching new heights on Jensen's "ornery meter." The neighbor dishes out a lot of gruff when he serves up cinnamon rolls, although he remains quiet and respectful on Wednesdays when Jensen's mother stops by with fresh baked caramel rolls.      

Unofficial meter readers familiar with the ways of the country know there is an inverse relationship between grumbling and the economy. When times are tough, people are withdrawn and quiet. Havoc reigns when times are good or the economy is recovering.            
The people of Wendell are starting to get cantankerous.

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