Minnesota and other central U.S. manufacturers grew and enjoyed an uptick in confidence levels in April, which proved welcome news after a worrisome report in March, Creighton University reported Friday.
Creighton's nine-state mid-America Business Conditions Index, which includes Minnesota, rose to 52.7 in April, from 51.4 in March, with help from rising sales and despite setbacks in employment, wholesale prices and exports. Any index that is above 50 signals growth.
In March, the regional index suffered a severe decline from February's robust 57 index. The drop had economists worried that U.S. factories might be in for much harder times.
But the index for April showed that the region was in solid growth territory again. The index also showed that factories nestled in the central core of the country appear to be doing better than U.S. factories as a whole.
The Institute for Supply Management (ISM) reported Friday that the growth index for all factories nationwide was unchanged in April at 51.5.
While Creighton's regional report — which includes Minnesota, Iowa, North and South Dakota, Nebraska, Missouri, Kansas, Oklahoma and Arkansas — showed stronger growth, mid-America producers still had some headaches.
Central "firms linked to energy and agriculture are experiencing pullbacks in economic activity," said Ernie Goss, report author and director of the Creighton Economic Forecasting Group. "Growth in Oklahoma and North Dakota, two energy-producing states, is approximately one-third to one-half of what it was one year ago. That growth is likely to move even lower in the months ahead as the strong U.S. dollar slows growth even more."
In Minnesota, the business conditions index rose to 51.3 in April from March's "growth neutral" mark of 50. March was the state's lowest index in 27 months.
So April's improvement signaled movement in the right direction. Minnesota factories reported declines in April employment and inventories but enjoyed a boost in export orders and had solid overall sales and new orders.
"Minnesota's export sales reached a record high of over $21.3 billion in 2014," Goss said before tempering his outlook. "I expect the strong U.S. dollar and slow global growth to push Minnesota's export growth into negative territory. Even so, the state economy will continue to expand but at a slower pace than for the same period in 2014."
Companies including Valspar paints, 3M Co., Polaris Industries, Pentair and Arctic Cat all have complained recently about the strong U.S. dollar impacting results.
On the national level, factory heads responding to the ISM survey also conveyed concerns that foreign currency exchange rates were suppressing revenues. U.S. manufacturers added that they are still negatively impacted by the slowdown in West Coast port shipments caused by a now resolved labor dispute. They cited that it's still hard to find skilled workers.
Factories reported a bump in new orders, a production rise in April and enjoyed a sixth month of low raw-material prices. Combined, that helped produce at least some growth for a 71st consecutive month, said Bradley Holcomb, chair of the ISM Manufacturing Business Survey Committee.
The results didn't impress Daniel Meckstroth, chief economist for the Manufacturers Alliance for Productivity and Innovation.
While the national ISM index was technically above the critical "50" neutral mark, it was "the sixth month without an increase," Meckstroth said.
For the future, there are signs of hope. Production "rose substantially last month," Meckstroth said. "Hopefully this is a sign that the Federal Reserve's manufacturing industrial production will accelerate into a spring production boom following a significant decline this past winter" due to unrelenting storms on the East Coast.
Dee DePass • 612-673-7725
