Minnesota's business conditions improved at a slower rate in January than in December or November, according to a regional economic study released Monday by Creighton University.

The Mid-America Business Conditions Index found that business supply managers in nine states saw modest growth last month in new orders, sales, delivery lead time and employment. Only inventories contracted, showing an index of just 43.3.

Any index below 50 signals economic contraction, while any index above 50 signals economic expansion. The higher the index, the better the situation. Overall, Minnesota grew, but only slightly, reporting an index of 51.4 for January. In contrast, the rate of growth was higher in December (index of 53.5) and November (57.1).

Still, Minnesota's inventory reductions were considered a positive sign that the economic recovery may be taking hold. Lower inventories signal that companies will soon need to restock and issue purchase orders.

The state's inventory news was echoed nationally in another report issued Monday by the Institute of Supply Managers (ISM) and by economists from the trade group Manufacturers Alliance/MAPI.

"There is a major inventory swing underway in the manufacturing sector that explains why industrial activity is so strong," said MAPI Chief Economist Daniel Meckstroth.

Nationwide, 13 manufacturing industries reported growth in January to create a solid overall business index of 58.4 percent -- the highest reading since August 2004, the ISM report said.

U.S. industries reporting gains included apparel and leather; textile mills; machinery; miscellaneous manufacturing; transportation equipment; paper; nonmetallic mineral products; computer/electronics; food, beverage and tobacco; electrical equipment and appliances; wood; metal products; and plastics/rubber. Only furniture and related industries reported contraction in January.

As for Minnesota, Creighton University economics professor and report author Ernie Goss noted that the state added 5,000 temp-agency jobs in the first six months of last year.

"This compares to 3,000 temporary jobs lost for the same period of 2008. This and our monthly survey point to a state economy on the mend, with permanent job gains for the first quarter of 2010. Even so, I expect the employment gains to be very modest," Goss said.

State officials reported that the number of temp jobs created in recent months had been approaching 7,000. However, they noted that December's temp jobs failed to grow.

While January marked the sixth straight month of expanded economic conditions for the state, Minnesota's business conditions were weaker than the cumulative results for the Midwest. The index for the nine-state region grew to 54.7 in January from December's 50.3 and November's 47.5.

The index examines economic activity in Minnesota, North Dakota, South Dakota, Iowa, Arkansas, Missouri, Kansas, Nebraska and Oklahoma.

Hiring in the region appeared to increase in January, with 13 percent of those surveyed reporting layoffs and 17 percent reporting hiring. The employment index jumped from 47.6 in December to 51.7 in January. In other positive news, the number of supply managers predicting layoffs in 2010 dropped from 41 percent to 24 percent.

"Readings over the past several months indicate that the regional economic recovery is picking up steam, albeit at a subdued pace," Goss said. "While results from the January survey are encouraging, surveys over the past several months point to an economic recovery that is fragile."

However, Goss said the likelihood of "dipping back into recessionary territory has diminished significantly according to our surveys. ... Supply managers are the 'canary in the coal mine' for the economy and they are indicating economic expansion in the months ahead."

That would be welcome news, since the Minnesota Department of Employment and Economic Development reported disappointing December unemployment figures 12 days ago. The jobless rate remained unchanged at 7.4 percent and Minnesota lost 4,100 jobs; another 8,000 workers left the workforce due to discouragement, retirement or other factors.

State officials also noted a drop in hours worked each week in December. January jobless numbers won't be reported until Feb. 18.

Dee DePass • 612-673-7725