Growth evaded Midwest manufacturers for a fourth consecutive month in October amid weak agriculture and oil markets and a worrisome uptick in factory job losses, according to a closely watched economics report released Tuesday by Creighton University.
The Mid-America Business Conditions Index that covers Minnesota and eight other states fell to a sobering 43.8 in October from 45.5 in September as factories reported decreases in jobs, new orders and sales. Anything under 50 signals economic contraction. Jobs proved a particular concern.
The region has lost 19,000 factory jobs in 12 months. While Minnesota factories increased employment in October, other conditions offered little to cheer about, according to the report.
Minnesota’s overall index rose slightly in October to 48.7 from September’s 48.4. Minnesota has been in negative-growth territory since August.
In October, Minnesota saw declines in new orders, production and inventories reported by metal producers and machinery manufacturers. The declines offset gains enjoyed by food processors.
For the entire nine-state region tracked, October’s report found that confidence levels among factory managers “slumped to a frail 39.7 from 48.5 in September,” said Ernie Goss, director of Creighton University’s Economic Forecasting Group. “Global economic uncertainty and weakness in the region’s agricultural and energy sector are weighing on the business economic outlook of supply managers.”
Several manufacturers have lowered expectations for the final quarter of the year, fearing durable-goods orders will remain weak.
St. Paul-based Ecolab reported third-quarter earnings Tuesday that continued to be affected by slumping oil-related sales. The company makes sanitizing chemicals for restaurants and hotels.
But it also makes chemicals that help separate and thin oil during the drilling and processing phases. Ecolab CEO Doug Baker said Tuesday that he expects the weak energy sector may be “bottoming out” and that the industry could see conditions normalize next year.
If true, the predictions can’t come soon enough for factory leaders across the central U.S.
Besides Minnesota, Creighton University’s monthly manufacturing report covers North and South Dakota, Iowa, Missouri, Kansas, Nebraska, Oklahoma and Arkansas.
The region lagged behind U.S. manufacturers. A national report released by the Institute for Supply Management [ISM] Tuesday found that U.S. producers grew in October.
The ISM national index rose to 51.9 in October from 51.5 in September as U.S. factory sales, employment and pricing improved.
“The data is stronger than expected as the consensus was looking for the index to tick up to 51.7,” said Thomas Simons, senior vice president of Jefferies LLC. “The ISM [index] this month is encouraging and provides further evidence that the manufacturing sector is rebounding from the slowdown over the summer.
Of 18 manufacturing sectors, 10 grew, led by: textiles; food/beverage; nonmetallic minerals; computers/electronics; furniture, paper; and printing.
Producers that shrank during the month were: wood products; apparel/leather; primary metals; plastics/rubber products; transportation equipment; electrical equipment, appliances and components; fabricated metal products; and machinery.