Toby Madden, Minneapolis Fed: Solid Economic Performance Forecasted for Minnesota in 2012

December 20, 2011

The 2012 economic outlook from the Federal Reserve Bank of Minneapolis calls for continued growth in the Minnesota economy. Based on the Minneapolis Fed’s statistical model, employment in Minnesota is expected to grow by a faster-than-average 2.8 percent, while the unemployment rate should drop to 6.5 percent in the fourth quarter of 2012. About average gains in personal income are also expected.

“The economy in Minnesota performed better than the nation in 2011, and it looks like growth will increase in 2012,” said Toby Madden, regional economist at the Minneapolis Fed.

In addition to the forecasting model, the Minnesota outlook includes information from the annual fedgazette business outlook poll of 395 district businesses and the annual manufacturing survey of 474 district manufacturers. The Ninth District includes Minnesota, Montana, North and South Dakota, northwestern Wisconsin and the Upper Peninsula of Michigan.

“The surveys and the statistical model both point to solid economic performance in 2012,” Madden said. “Businesses are optimistic for their own operations and expect moderate improvement in Minnesota.”

The surveys of business leaders and manufacturers indicate that businesses expect more sales and production in 2012 and will accomplish this through increased employment and capital investment. They also expect to raise prices.

When asked about their state economy, Minnesota respondents said they expect increased overall consumer spending, employment and business investment. They expect about a 2 percent increase in wages and benefits. However, both the surveys and the statistical model are bearish on housing construction.