Sinking grain prices and cooling product orders in September slowed growth in manufacturing plants across the Midwest and the country, results of two surveys showed Wednesday.
The reports, by the national Institute of Supply Management (ISM) and Creighton University, showed slight dips in growth for September after months of robust activity.
For the nation, the ISM found that new product orders, hiring and raw material inventories slowed a bit during the month, while productivity and non-grain prices heated up.
The results helped create a still-strong index reading of 60. But that was down from the 66.7 figure reported in August. Any index above 50 connotes economic expansion, while any index below 50 signals a decline.
Nationwide, 15 of 18 manufacturing industries grew during the month, with wood, metal, minerals and furniture product makers topping the list. Supply managers surveyed by the ISM noted that their September benefited from falling fuel prices, the national uptick in warehouse and apartment construction and an uptick in consumers' disposable income. Managers however, also reported being frustrated by freight backlogs and the inability to recruit new hires with the skills needed.
In a research note, Jefferies LLC chief financial economist Ward McCarthy, said the national manufacturing index for September proved weaker than expected but was still strong. "The headline is disappointing against last month's three-year high and consensus expectations, but the index remains at a strong outright level."
That sentiment was echoed in the Midwest, though Minnesota remained at the high end of the performance range.
Manufacturers in Minnesota and eight other middle-American states reported that business conditions remained solid but slowed in September amid falling grain prices, worries over rising health care costs and unfavorable currency rates that softened exports, Creighton University reported Wednesday.
The Mid-America Business Conditions Index reading for September fell to 54.3 from 57.2 in August. The report's nine-state region includes Minnesota, South and North Dakota, Iowa, Nebraska, Missouri, Kansas, Arkansas and Oklahoma.
Ernie Goss, report author and director of the Creighton University Economic Forecasting Group, noted the strong influence that agriculture had in the region. "A 30 percent decline in grain prices over the past year has produced a pullback in economic activity for regional businesses linked to agriculture," Goss said.
Factories in the central United States continued to increase inventories of raw materials and supplies, though at a slower pace than August.
"This is yet another signal that supply managers remain reasonably upbeat about the economy as they increased inventories in anticipation of expanding sales for their companies in the months ahead," Goss said.
For Minnesota, Goss noted that the state's business conditions index dipped slightly to a "very healthy" 66.3 from 66.9 in August. Factories across the state reported robust new orders, productivity, inventories and delivery lead times. The results were credited to gains seen by food processors, vehicle parts manufacturers and makers of other durable goods that last more than six months. Goss noted that "firms in the state with ties to vehicle manufacturing are also expanding at a healthy pace."
Such companies, which include Twin Cities-based 3M, Polaris, Arctic Cat, Donaldson, and Graco, will soon report quarterly results that include September.
Dee DePass • 612-673-7725
