Manufacturing growth in April could lay groundwork for more strengthening.
Factories in Minnesota and nationwide ramped up in April, offering more evidence that a sustained resurgence in manufacturing could be ahead.
Two widely read barometers of manufacturing activity Tuesday reported solid gains for the month, fueled by strong increases in production, new orders and employment. Both benchmarks hit their highest levels in almost a year.
The national Institute for Supply Management (ISM) survey reported an increase in its index from 53.4 in March to 54.8 in April. A reading above 50 indicates growth. The ISM said it was the 33rd consecutive month of expansion.
A similar index of a nine-state, mid-America region that includes Minnesota registered 60.0 in April vs. 58.6 in March. It was the highest level since May 2011 for the regional index that is compiled by Creighton University.
"The base of the recovery has been laid down," said Josh Bushard, manufacturing leader at audit, tax and advisory firm Grant Thornton's Minneapolis office. He noted that the ISM study reported wide-ranging growth, with expansion in 16 of its 18 industry sectors in April.
In a research note, Wells Fargo economist Eugenio Aleman pointed out a drop in the ISM study's inventory component as another positive sign. "This indicates that the manufacturing sector, instead of slowing down over the next several months, should see some strengthening," he said.
Although the predominance of farm-related manufacturers continued to help bolster the Creighton survey's results, the recovery is starting to spread to other sectors, said Prof. Ernie Goss, who oversees the study. Goss noted that the growth occurred despite rising energy prices.
Minnesota was one of six states that reported higher rates of growth in the Creighton study. Goss attributed the gain of Minnesota's index from 56.7 in March to 61.0 in April to a broad-based increase in activity by the state's durable goods manufacturers.
The Creighton study's confidence index, which measures respondents' outlook for the next six months, posted an especially strong increase, from 62.2 to 64.5. Bushard said that confidence among many of his clients has resulted in "measured increases in hiring."
Rick Paulsen, president and chief operating officer of Douglas Machine Inc. in Alexandria, said his company has been hiring fairly steadily in recent months. In the past 12 months, the company has added more than 70 people to its workforce, he said. Paulsen said he expects to continue adding employees and like many other manufacturers scrambling to find workers, is currently looking for machinists and engineers.
Douglas designs and manufactures packaging automation machinery for other manufacturers and therefore is a good gauge of the sector's overall health, Paulsen said. "Order levels have been very good," he said. "Our customers are continuing to invest in technologies that enable them to be more profitable." Most of the company's customers are in the food, beverage and personal care products businesses.
Douglas has some customers in Canada and Mexico but otherwise does not do business in foreign markets. "With some companies you see their growth coming mostly from emerging markets, but that's not us," he said. "Our growth is from U.S. manufacturers."
Exports did play a key part in boosting both the ISM and Creighton surveys in April. About 26 percent of ISM survey respondents said their businesses had higher export orders in April. That's up from just 18 percent in March.
"Exports continue to be one of the most important factors driving growth in the regional economy higher," Goss said in a statement. "Short of trading skirmishes or a strong dollar, I expect exports to remain healthy for most areas of the nine-state region."
Susan Feyder • 612-673-1723