Manufacturing in the Midwest and across the United States showed stronger activity in August and hinted that the U.S. economy might be gaining traction, according to two closely watched economic reports released Tuesday.
A key index for Mid-American states rose in August for the first time since March, as exports jumped and hiring surged at machine and food factories. Meanwhile, U.S. supply managers said a key factory index grew at the fastest pace since January amid rising exports and total orders.
In the Midwest, the Creighton University Mid-America Business Conditions report found states benefited from strong export orders in August, particularly for appliance and machine parts and other “durable” goods. Creighton’s study covers Minnesota, Iowa, Missouri, Kansas, Arkansas, Oklahoma, South Dakota, North Dakota and Nebraska.
Minnesota fared particularly well in August as metal and machine manufacturers reported robust growth for nine consecutive months, the report said.
“Expansions among durable goods producers in the state more than offset slightly negative conditions for food producers and [other] nondurable goods firms,” said Creighton Economic Forecasting Group director Ernie Goss. The boost in machines and long-lasting parts was key to “pushing [Minnesota’s] overall manufacturing sector and economy forward.”
While Minnesota, Iowa, Kansas and the Dakotas proved “healthy” during the month, Missouri and Nebraska saw minor gains while Oklahoma and Arkansas suffered sinking economic conditions as production, new orders or hiring failed to keep pace.
But that wasn’t enough to suppress growth for the region. The Mid-America Business Conditions index rose from 53.5 in July to 53.8 in August. Any index above 50 signals economic expansion, while any index below 50 signals a decline.
While overall business grew, the region did suffer a slight decrease in confidence as raw-material prices rose at the same time supply managers spent down inventories instead of ordering fresh stock.
“In anticipation of slower sales and growth in new orders, companies in our survey have, for the first time since November, reduced inventory levels,” said Goss, who authored the report.
Manufacturers of “nondurable” or quickly consumed goods did not fare as well as those that made machinery, electrical and metal components that last for years, Goss said. “Our results point to positive growth for the final quarter of this year, but at approximately half the rate of the first quarter,” he said.
More good news
August’s regional results dovetailed nicely with a national report issued Tuesday that also signaled growth.
The Institute for Supply Management (ISM) reported that the U.S. manufacturing sector grew for a third consecutive month due to an uptick in orders, exports and prices. The ISM producers manufacturing index reached 55.7 from 55.4 in July, for the highest reading of the year, said ISM Chairman Bradley Holcomb.
He noted that slight decreases in employment and production gains were not enough to offset the positive results. “The sales picture has turned around,” said Chad Moutray, chief economist for the National Association of Manufacturers. “Given the frustratingly slow pace of sales, both domestically and globally so far in 2013, this is definitely good news. …
“It builds on the surprisingly strong data from July, which helped to give a psychological boost to the sector and was a sign that activity had indeed begun to accelerate.”
Tuesday’s ISM report showed the overall economy grew for 51 consecutive months and that 15 of 18 manufacturing industries grew in August. The strongest growth was seen in textiles, wood products,electrical equipment, appliances and components, food, beverage, nonmetal minerals, and plastics and rubber products.