Minnesota and other Midwest manufacturers posted strong growth in January, bucking a slowdown seen nationally, according to two closely watched economic reports released Monday.
Creighton University reported that its nine-state Mid-America Business Conditions Index rose in January, despite a slowdown in agricultural equipment sales and fresh layoffs planned for John Deere and the energy-related firms Helmerich and Payne.
Thanks to strong orders, exports and production gains for factories not related to soft energy prices or agriculture, Creighton's overall Mid-America index rose to 54.8 in January from 54.4 in December.
Anytime the index is above 50, it indicates growth. In Minnesota, the index fell slightly to a still robust 60.1 from 61.4 in December.
"For states in the region, growth for companies outside of energy and agriculture will more than offset the decline in those sectors," said Ernie Goss, the report's author and director of Creighton's Economic Forecasting Group.
The Creighton report — which covers Minnesota, Iowa, North and South Dakota, Nebraska, Kansas, Missouri, Arkansas and Oklahoma — stood in contrast to results gathered nationally by the Institute for Supply Management (ISM).
The ISM index for U.S. manufacturers fell to 53.6 in January from 55.1 in December. Officials noted the index was still high, even though its decline signaled slower growth.
Bradley Holcomb, chairman of the institute's survey committee, said part of the problem was that U.S. factories grappled last month with a shipping dock backlog on the West Coast. That backlog ultimately affected exports.
Despite that speed bump, surveyed factory heads across the country reported that product demand appeared to be growing for the remainder of 2015.
In January, 14 of the 18 U.S. manufacturing sectors grew. The strongest contributions came from metals and metal fabrication, woodworking, printing, electrical equipment/appliances, petroleum products and paper products.
The manufacturing reports released just a week or two after many publicly traded manufacturers reported upbeat quarterly earnings. However, some including John Deere, Caterpillar, Arctic Cat and others indicated problems such as slower crop-equipment sales, lower energy prices or negative foreign currency translations, especially in Canada.
Daniel Meckstroth, chief economist for the Manufacturers Alliance for Productivity and Innovation, noted it was the third month of negative change since October. "All of the components of the index that deal with orders and production were less favorable," he said.
January's backlog of factory orders fell, and the manufacturing trade deficit continues to get worse, he said. "The only good news in the report is that the employment index continues to signal a rising level of manufacturing employment," Meckstroth said.
Goss said he expects job cuts to grow in the coming months for factories tied to energy and agriculture. However, those cuts are coming just "as firms outside these two sectors are expanding hiring at a healthy pace," he said.
That discrepancy was big enough to dispel pessimism. Surveys indicated boosted confidence levels for the region for the next six months, Goss said.
Dee DePass • 612-673-7725
