Business is picking up, albeit haltingly, among Minnesota manufacturers.
New orders, sales and production ticked up in May and employers added jobs, according to a monthly survey of regional supply managers released Wednesday by Creighton University.
The trends are in line with slight improvements in the manufacturing sector across the nine-state region in America's midsection, which has experienced "anemic, but stabilizing and improving business conditions" over the past several months, according to the report.
The Minnesota Business Conditions Index climbed to a solid 54.3 last month from 49.8 in April, with any reading above 50 indicating economic growth.
"In Minnesota, the economy is improving, manufacturing is getting a little bit stronger — particularly nondurable goods," said Ernie Goss, director of Creighton University's Economic Forecasting Group.
Among the state's stronger sectors are food processing and ethanol energy production, with companies such as Cargill providing stability.
The growth came as agricultural commodity prices have risen slightly and exports continue to improve. In the past two years, Minnesota has seen exports decline 6.6 percent, which has contributed to sluggish economic growth.
The signs are "promising," Goss said. "But it's still not back to where we'd like to see it."
A national report by the Institute of Supply Management, also released Wednesday, showed broader signs that the worst of the manufacturing slump may be fading. The ISM index rose to 51.3 from 50.8 in April, the third consecutive month above break-even.
New orders showed gains across 14 industries, including paper, plastics, chemicals and fabricated metals. It's one indicator of lasting stability, a report co-authored by Wells Fargo chief economist John Silvia highlighted.
"The new orders index intimates that growth in current production should not give way in the near term," he said.
Thomas Simons, senior money market economist at Jefferies LLC, said he was encouraged by the stronger-than-expected improvements, even though the results weren't as broad-based as hoped. The report underscores the reality that the recovery will remain "fitful and uneven."
"Despite the challenges posed by weak international economies, volatility in foreign exchange and volatility in commodity prices, we remain optimistic about the U.S. manufacturing sector in the long run," Simons wrote in a note to investors.
The national report is a significantly more positive read on the manufacturing sector than more recent regional surveys, as Minnesota's largest employers can attest. In recent months, 3M Co., Essar Steel Minnesota and Polaris have announced layoffs.
Even May's small gains mask an undercurrent of uncertainty in Minnesota and its mid-American neighbors, according to Creighton's business confidence index.
When respondents were asked to look ahead six months, economic optimism slipped 3.6 percent from April. Global economic uncertainty combined with expected interest rate hikes were top of mind for managers, Goss said.
Nearly one-third expect U.S. economic weakness to pose the biggest challenge for business operations for the rest of 2016.
All eyes are on Friday's U.S. labor report, which will shape the Federal Reserve Board's approach to an interest rate hike when it meets June 15.
"One of the keys to the level of economic growth in the months ahead will be the interest rate position of the Federal Reserve," Goss said. "If the Federal Reserve telegraphs more aggressive rate hikes in the months ahead at its June meetings, the U.S. dollar is very likely to strengthen, thus slowing regional manufacturing."
Still, the employment picture is brightening in Minnesota and the rest of the states included in the Mid-America Business Conditions Index: Arkansas, Iowa, Kansas, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota, as the index improved to 52.1 from 50.1 in April. It was the first time since August 2015 that the regional employment gauge advanced above neutral growth.