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Creighton's monthly survey of business conditions in the Midwest fell to its lowest level of the year in October. September 2013 file photo of Illinois custom metal factory.

Evan Ramstad,

Midwest manufacturing index was stuck in neutral last month

  • Article by: Dee DePass
  • Star Tribune
  • November 1, 2013 - 8:25 PM

The recent government shutdown and a slowing agriculture sector held back Midwest manufacturing growth in October, according to a widely watched report released Friday by Creighton University.

Several leading economic indicators, such as jobs, exports and new orders, fell during the month. That caused the business index for the nine-state Mid-America region to flatten from growth to neutral. The decline produced the lowest index levels since 2012.

“The partial government shutdown combined with pullbacks among firms with ties to agriculture pushed overall economic conditions lower for the month,” said Ernie Goss, author of the report and director of Creighton’s Economic Forecasting Group.

Creighton’s Mid-America business conditions index fell to 50 in October from 54.8 in September. Any index above 50 signals growth, and any figure below that signals decline. The fact that the index fell to 50 signaled no growth at all.

Those regional results, however, differed from growth seen nationwide.

According to a separate report issued Friday by the Institute for Supply Management, U.S. manufacturing grew for a fifth consecutive month due, in part, to a flurry of business at textile mills, printing plants, food and beverage firms, oil and coal producers, and furniture makers. October orders, factory production, jobs and inventory grew, which helped nudge the national monthly index to 56.4 from 56.2.

“The big story in this [U.S.] report was the strength of sales,” said Chad Moutray, chief economist at the National Association of Manufacturers. “The index of new orders [was] up to 60.6 for the month. This marks the third straight month with sales exceeding 60.0 [and] indicates an extremely healthy pace of new orders.”

But in the Midwest, product producers were not as fortunate.

Goss noted that regional farm-equipment firms and some food producers suffered a drop in domestic orders and a slowdown in exports.

The Creighton report examines monthly economic conditions for manufacturers in Minnesota, Wisconsin, Iowa, North Dakota, South Dakota, Nebraska, Missouri, Kansas and Arkansas.

Minnesota stays positive

In Minnesota, factories reported some growth during the month. However, the gains were not as robust as in September. Minnesota’s economic index fell to 55.2 from 57. Still, it performed better than Nebraska, South Dakota, Missouri, Oklahoma and Arkansas.

“Manufacturing growth in Minnesota is slowing but remains positive. Firms are increasing hours rather than adding to their payrolls,” Goss said.

Several Minnesota companies expressed reservations about the economy during quarterly earnings announcements in October. Some, such as bedmaker Select Comfort and Arctic Cat missed Wall Street expectations for the quarter and cited ongoing concern over the economy and a pullback by consumers. Even firms that reported solid growth for the quarter, such as ATV maker Polaris Industries and conglomerate 3M Co., cited the uncertain economy and the government shutdown as causes of concern that made growth harder.

While October conditions failed to drive consistent growth across the Midwest, Goss noted that manufacturers said they were relieved that the federal government shutdown ended and that they are more optimistic about the next six months. The confidence index grew to 56.0 from 51.8 in September.

“Even though the shutdown and raising the debt ceiling were only pushed out several months, it did boost the economic outlook for firms in our survey,” Goss said.

Dee DePass • 612-673-7725

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