Factories report robust business in August

Manufacturers from Minnesota and other plains states enjoyed solid growth during August but also indicated concern that trade tariffs and inflation were beginning to have a negative impact on business.

The widely watched nine-state Mid-America Business Conditions Index, released Tuesday by Creighton University, rose to an impressive 61.1 in August amid a spike in new orders, production and delivery speeds. August's index rose from 57 in July and is a return to a growth level seen in June.

Minnesota's index climbed to 61.9 in August from 55.8 in July.

"The regional economy continues to expand at a very healthy pace with manufacturing growth of approximately 3.1 percent over the past 12 months compared to a much lower 2.6 percent for the U.S.," said Ernie Goss, director of Creighton's Economic Forecasting Group. "However, I continue to expect expanding tariffs, trade restrictions and rising short-term interest rates from a more aggressive Federal Reserve to slow regional growth to a more modest, but still positive pace, in the months ahead."

The strong Mid-America results mimicked the nation's. A separate Institute for Supply Management (ISM) report released Tuesday showed an index jump to 61.3 during the month from 58.1 in July.

For Creighton's Mid-America region, August's showing marked the 21st month in which factory growth remained above the critical "neutral" threshold of 50 for the nine states Creighton tracks. Any index below 50 signals economic contraction.

While economists were pleased that factories performed well, they noted some caution for the nine-state region that includes Minnesota, Iowa, Nebraska, Missouri, the Dakotas, Kansas, Oklahoma and Arkansas.

August's index for international trade slipped during the month at the same time that inventory jumped, indicating that ingredient stockpiling in factories may have begun. Confidence levels for the next six months were still strong but slid from July.

One supply manager said on the survey: "The impact [of tariffs] is showing up in dramatic reductions of orders from our customers."

Despite the disruption, four of five Midwest factory supply managers said they support continuing, or even expanding tariffs and trade restrictions.

On the national level, the ISM survey found factory heads countrywide were quite concerned about tariffs and said that while product demand remains "robust" — with 16 of 18 manufacturing industries reporting growth — their supply chains continue to "struggle."

"Respondents are again overwhelmingly concerned about tariff-related activity, including how reciprocal tariffs will impact company revenue and current manufacturing locations," said Timothy Fiore, ISM manufacturing survey committee chairman. Panelists are actively evaluating how to respond to these business changes, given the uncertainty."