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Zach Koski, an unracking supervisor at Hardcoat Inc. in St. Louis Park, was hired in February.

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Heidi Orr assembled a diaphragm pump used in the food industry at Graco’s Minneapolis plant.

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Toro engineers tested a commercial tractor at the company’s Bloomington facility.

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Midwest business roared like a lion in March

  • Article by: Dee DePass
  • Star Tribune
  • April 1, 2013 - 9:20 PM

Midwestern businesses roared in March as new orders for manufactured goods delivered the biggest monthly increase in 15 months, according to a Creighton University manufacturing survey released Monday.

The report proved a boost for the Midwest and Minnesota, especially when compared to a national study Monday that showed slowing growth for manufacturers nationwide.

Minnesota logged its fourth consecutive month of growth. Results were driven by an uptick in new product orders, sales, delivery lead times, employment and inventory use. Demand was strongest for metal goods, machinery and agricultural equipment products, according to the report.

Results boosted Minnesota’s “business conditions’’ index to 55.2 in March from 52 in February and contributed to the rise for the entire nine-state region. Index figures above 50 indicate growth while those below 50 show contraction.

The full Mid-America Business Conditions Index leapt to 58.2 from 53.1 in February for the region including Minnesota, Iowa, South and North Dakota, Arkansas, Oklahoma, Nebraska, Missouri and Kansas.

“This is the largest one-month jump that we have recorded since January 2012,” said Ernie Goss, author of the report and director of the Creighton University Economic Forecasting Group. “We will have to record several consecutive months of readings like this to be confident that the regional economy is picking up steam.’’ But for now, he said, “our survey results point to an upturn in regional job growth in the months ahead.” Most of the March increase was the result of a jump in new orders, he said.

In a surprise finding, about 76 percent of supply managers surveyed by Creighton University said they were not affected by the federal “sequestration” budget cuts that started to go into effect March 1 after Congress failed to produce a budget compromise. Another 23 percent of respondents reported “only modest impacts” from the government budget cuts.

In contrast, surveys taken in February indicated significant concern by a third of manufacturers who worried that the $85 billion in federal budget cuts could hack into government supply contracts.

So far, that hasn’t been the case. Business confidence levels rose across the Midwest in March, the report said.

That may not be so surprising, since in recent months Toro, Graco, Polaris Industries, Donaldson Co. and a host of other metal product and machine makers have either reported sales increases or boosted sales projections.

Yet the strong Midwest showing stood in contrast to a muddled national report issued Monday by the Institute for Supply Management (ISM). In that report, manufacturers signaled that operations continued to grow, but at a slower rate.

While 14 of 18 manufacturing sectors grew, March’s ISM index dropped to 51.3, from 54.2 in February. Economists were expecting 54.0. Employment, exports and backlogged orders rose in March, but new orders and prices fell.

Nationally, growth was particularly strong for wood and plastic products, electrical equipment and appliances, fabricated metals, paper and clothing goods. Weakness was seen in petroleum and coal products, chemicals and machinery.

Ward McCarthy, managing director and chief financial economist at Jefferies & Co. Inc. in New York, said the March reading is the weakest since December, while the February reading was the highest since July 2011.

“This month’s data is not all that encouraging when taken on its own,’’ McCarthy said in a note to investors. “But … we view the downtick as a momentary pause in the overall uptrend in the manufacturing sector.’’ He said other data suggests that the manufacturing sector is regaining momentum lost over the second half of 2012 due to concerns over the fiscal cliff.

“It’s a mixed picture,” Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott in Philadelphia, told Bloomberg News. “It highlights the downside of reduced government spending but underscores a fairly stable private sector.”

 

Dee DePass • 612-673-7725







 

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