Factories report robust business in August

September 4, 2018

Manufacturers from Minnesota and other plains states enjoyed solid growth during August but at the same time indicated concern that trade tariffs and inflation were beginning to negatively impact business.

The widely watched nine-state Mid-America Business Conditions Index, released Tuesday by Creighton University, rose to an impressive 61.1 in August amid a spike in new orders, production and delivery speeds. August’s index rose from 57 in July and is a return to a growth level seen in June.

Minnesota’s index climbed to 61.9 in August from 55.8 in July.

“The regional economy continues to expand at a very healthy pace with manufacturing growth of approximately 3.1 percent over the past 12 months compared to a much lower 2.6 percent for the U.S.,” said Ernie Goss, director of Creighton’s Economic Forecasting Group. “However, I continue to 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.”

The strong Mid-America results mimicked the nation’s. A separate Institute for Supply Management (ISM) report released Tuesday showed an index jump to 61.3 during the month from 58.1 in July.

For Creighton’s Mid-America region, August’s showing marked the 21st month in which factory growth remained above the critical “neutral” threshold of 50 for the nine states Creighton tracks. Any index below 50 signals economic contraction.

While economics were pleased that factories performed well, they noted some caution for the nine-state region that includes Minnesota, Iowa, Nebraska, Missouri, the Dakotas, Kansas, Oklahoma and Arkansas.

Surveys of manufacturing heads taken last month revealed that more than half of the supply managers reported that recent U.S. tariff hikes invoked by the Trump administration and retaliatory efforts by other countries had a negative impact on factories ability to buy international goods. Many reported that prices had jumped and caused supply chain problems as producers scrambled for raw material replacements.

August’s index for international trade slipped during the month at the same time that inventory jumped, indicating that ingredient stock piling in factories may have begun. Confidence levels for the next six months were still strong but slid from July.

One supply manager reported that, “The impact (of tariffs) is showing up in dramatic reductions of orders from our customers.”

Despite the disruption, four of five factory supply managers said they support continuing, or even expanding tariffs and trade restrictions.

Dee DePass • 612-673-7725

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