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Midwest manufacturing growth slows in September amid labor, trade and inflation woes

October 1, 2018

Manufacturing growth slowed in Minnesota and eight other central states during the month of September amid troubles with worker shortages, trade tariffs and rising prices for raw materials, according to an economic report released Monday by Creighton University.

The nine-state Mid-America Business Conditions Index fell to 57.5 in September, from Augusts extraordinarily strong index of 61.1.

Economists were far from alarmed by the dip, given that any index above 50 still signals some form of economic growth.

September marked the 22nd consecutive month in which the index signaled economic expansion for the Mid-America region, which includes Minnesota, Iowa, Kansas, Missouri, Nebraska, South Dakota, North Dakota, Arkansas and Oklahoma.

Minnesotas Index slipped to 60 from 61.1 in August. Septembers regional slowing echoed the slightly-reduced factory-activity seen nationwide.

In a separate national report released Monday, the Institute for Supply Management (ISM) found Septembers U.S. manufacturing index fell to 59.8 from 61.3 in August.

For the Midwest, Creighton economists noted several factors contributed to the regional slowdown. New orders, production, employment and raw material deliveries all saw modest slowdowns during the month.

Creightons survey of manufacturing managers and owners also revealed that 54 percent saw price swells and supply disruptions in September as a result of 2018 trade tariffs implemented by President Donald Trump and retaliatory taxes issued by Canada, Mexico, China, and Europe. Steel prices alone jumped 19 percent so far this year as a result of the trade woes.

Even so, the Mid-America index for exports rose during September to 53 from 51 in August as producers increased their overseas product orders in anticipation of expanding tariffs and trade restrictions in the months ahead.

Some 25 percent of surveyed factory heads said they wanted trade tariffs eliminated immediately. However, another 29 percent favored putting even greater tariff pressures on China.

Despite the trade wars, factory owners insisted their businesses remained strong. In fact, confidence levels for the next few months soared to an index of 68 from 60 in August.

The regional economy continues to expand at a healthy pace ... In terms of business confidence, rising trade tensions and tariffs, were more than offset by healthy profit growth, relatively low interest rates, and reduced tax rates, said Ernie Goss, director of Creighton Universitys Economic Forecasting Group.

However, shortages of skilled workers remain an impediment to even stronger growth, Goss said. I expect expanding tariffs, trade restrictions and rising short-term interest-rates from a more aggressive Federal Reserve to slow regional growth to a more modest, but still positive pace in the months ahead.

Last month, The Federal Reserve elected to increase short term interest rates for the third time this year.

This past weekend, U.S. Commerce officials announced a new trade deal with Canada and Mexico, which if approved in 2019, is expected to ease trade relationships for U.S. producers.

Dee DePass 612-673-7725

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