Midwest manufacturing conditions improved for a fourth straight month in February, hitting the highest levels seen since 2014. Minnesota, however, did not grow as fast as some of the other Upper Midwest states.
A widely watched economic report from Creighton University, which tracks factories in Minnesota and eight other central U.S. states, found hiring, exports and confidence levels surging, even as inflationary pricing pressures stalked producers.
The overall improvement was a relief to economists and factory heads who worried that manufacturers would continue wrestling with huge obstacles endured during much of 2016. Last year was marked by downturns in mining, energy and agriculture sectors, as well as trade pressures from the high U.S. dollar and slowdowns in China, Japan and Brazil.
The nine-state Creighton Mid-America Business Conditions index in February jumped to a strong 60.5 from 54.7 in January, mostly due to oil-equipment gains in North Dakota and truck factory gains in Missouri.
Six months ago, the index was at just 47.8. An index above 50 signals growth.
“This is the fourth consecutive month the index has increased and points to an improving regional manufacturing economy. I expect this to generate even healthier growth for both manufacturing and nonmanufacturing [entities] through the third quarter of this year,” said Ernie Goss, director of Creighton’s Economic Forecasting Group.
While Minnesota’s manufacturing sector in February indicated fairly strong growth, with a 54.3 index, it slowed a bit from January’s 54.7 index, as companies faced softness in the vehicle parts and ag equipment sectors, Goss said. On the plus side, Minnesota producers making medical equipment and ethanol are seeing healthy gains, helping to offset almost all of the weakness seen in auto and agricultural components.
Goss noted that surveyed Minnesota supply managers indicated that they expect positive, but slower, growth during the next six months as “ag is still not doing well.” Crop prices are still very low, which tends to affect agricultural equipment purchases.
Goss said Minnesota should bode well over the long haul because of its diverse manufacturing economy, which includes “high tech manufacturing … and one of the largest medical equipment sectors in the United States. It’s held up really strongly.”
The growth experienced by most Midwest producers was echoed nationwide.
According to a nationwide report issued Wednesday by the Institute for Supply Management (ISM), conditions largely improved for U.S. producers across the country in February. The ISM manufacturing index rose to 57.7 in February from 56 in January as 17 out of 18 industries reported growing during the month. Only furniture factories contracted during the month.
U.S. producers leading results included textile mills and makers of apparel and machinery.
During recent earnings reports and meetings with analysts, executives from 3M Co., Polaris Industries, Ecolab and Pentair all signaled that they expected 2017 to show improvements over 2016 as key customer groups and oil, mining and ag markets begin to stabilize.