Manufacturing growth slowed slightly in October

  • Article by: JIM BUCHTA , Star Tribune
  • Updated: November 1, 2011 - 10:34 AM

But one report said Minnesota manufacturers will still add some jobs.

New factory orders grew in October, but the overall health of the manufacturing sector remained weak, with anemic job growth in the Midwest, according to two closely watched reports released Tuesday morning.

The Institute of Supply Management ( ISM) said says its manufacturing index dropped to 50.8, down from 51.6 in September. Any reading above 50 indicates expansion. At the same time, its measures of production and exports fell and a gauge of employment dipped.

However, there was some positive news: Survey respondents said raw materials prices fell sharply, and its new orders index increased 2.8 percentage points from September to 52.4 percent during October, a sign of growth after three months of contraction.

The Minnesota Business Conditions Index, a regional index by Prof. Ernie Goss at Creighton University, said that Minnesota's business index fell slightly from 56.3 in August to 55.3 in September. "I expect manufacturing job growth [in Minnesota] to be positive but weak in the months ahead," Goss said. Minnesota continues to have strong agricultural growth and positive strides in the exports of grains and manufactured goods. Despite 27 straight months of growth, the index shows that manufacturing activity is slowing. The ISM index, which is compiled by a trade group of purchasing managers based in Tempe, Ariz., hit a two-year low of 50.6 in August, contributing to fears that the economy was at risk of slipping into recession. A gain in September helped calm those worries as did last week's news that the economy expanded at an annual pace of 2.5 percent in the July-September quarter, the best quarterly growth in a year. Companies are buying more industrial machinery and heavy equipment, a positive sign for factory growth. Business spending on equipment and software was a key driver of growth in the third quarter. In recent months, overall job growth has stagnated. Employers have added an average of only 72,000 jobs per month in the past five months. That's far below the 100,000 per month needed to keep up with population growth. And it's down from an average of 180,000 in the first four months of this year. Employers added only 103,000 jobs in September. The unemployment rate stayed at 9.1 percent for a third straight month. According to the regional report by Goss, Minnesota's manufacturers have added 5,000 jobs in the past year, although the sector still has almost 25,000 fewer jobs than at the end of 2008. Goss's index remained above growth neutral for the 27th straight month at 55.4, up slightly from 55.3 in September. Higher agricultural commodity prices in the state have slowed economic growth in the food-processing sector, but medical equipment manufacturers have seen more growth and profitability. Goss expects positive -- but slow -- job growth over the next three to six months. The Associated Press contributed to this report.

Jim Buchta • 612-673-7376

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