With much-needed boosts to sales and new orders, Minnesota and Midwest manufacturers said they returned to solid expansion in January. And Minnesota showed jobs growth, a welcome sign in a tight economy.
It was the second month in a row that manufacturing conditions improved in nine Midwestern states surveyed by Creighton University in its Mid-America Business Conditions Index.
Manufacturing nationwide also rebounded, with factories reporting to the Institute for Supply Management (ISM) that on average they returned to growth. In December, the national index was 47.8; in January, it rose to 50.9. Anything above 50 signals expansion. Nationwide, only eight of 18 manufacturing sectors grew last month.
Creighton’s Mid-America index showed brisker growth, with its index in January leaping to 57.2 from 50.6 in December. The index was at its highest point in almost a year.
Minnesota’s index also was 57.9, up from 50.7 in December, Creighton reported. Supply managers in the state reported growth in sales, new orders, inventories and job growth.
Creighton economists noted that the state’s factories enjoyed a 4.5% wage increase and hiring among food producers and other makers of “nondurable” goods. On the flip side, however, “durable goods manufacturers in the state are shedding jobs,” said Ernie Goss, director of Creighton’s Economic Forecasting Group.
The survey findings landed Monday, just after several multinational companies such as 3M, Polaris and Graco recently reported fourth-quarter results that were mixed, signaling domestic-sales increases but in several cases the continued slowdown of business from China, Asia and sectors such as auto, aerospace and industrial.
Creighton’s January surveys were conducted before the coronavirus outbreak in China fully hit and therefore do not include effects from what has developed into a growing international health crisis, university officials said.
The Creighton report — which tracks factory conditions across Minnesota, Iowa, Missouri, Kansas, Nebraska, North and South Dakota, Arkansas and Oklahoma — did see an unexpected uptick in employment in January, following months of complaints that trade tariffs and the inability to find and hire workers was severely hampering job growth.
“January’s positive employment reading was a positive and unexpected outcome,” said Goss. “The weakness in the region’s manufacturing and agriculture sector [had] spilled over into the broader regional economy. Over the past 12 months, the Mid-America region has added jobs at [only] a 0.6% pace. [That’s] less than half the 1.4% rate of the U.S. economy.”
The folks at MRG Tool and Die in Faribault said they can relate. The company fabricates metal parts for robotics-equipment firms and manufacturers of aircraft, food, transportation and consumer products.
The company, with 73 employees, has been able to add some new hires but it’s tough. “There are not a lot of individuals out there when I am looking for skilled machinists,” said MRG President Rod Gramse during a phone interview. “If I am looking for individuals who have a tool-and-die tooling background, there are not as many of them.”
That has hindered growth, Gramse said. Yes, the company is growing at 3% to 5% a year but it doesn’t have enough workers with the skills needed to operate all its high-tech machines, he said.
Still, he was happy to see sales grow across the board. “We had some decent activity in January,” Gramse said Monday, noting that his month benefited by catching up on back orders.
Creighton reported that other positives for the region included increases in inventories and export orders, even as imports sank dramatically during January.
Supply managers reported enhanced confidence levels for the month that were aided by January’s passage of the new trade agreement among the United States, Mexico and Canada (USMCA), as well as the signing of the Phase One trade agreement with China.
Nearly a third of all factory managers Creighton surveyed reported that shifting U.S. trade policies and the resulting trade war caused them to change international vendors and disrupt traditional supply chains.
While it is too soon to see actual sales results from the new trade agreements, factory heads reported feeling more confident the future. “Approximately 56% of supply managers expect USMCA and Phase One Chinese agreement to have a positive impact on their business prospects,” Goss said.