U.S. and Midwest manufacturing grows in January despite lousy weather

U.S. manufacturing grew at the slowest pace in eight months as bitter cold weather and snowstorms across the country weakened demand for new orders.

The tepid report Monday from the Institute for Supply Management sent stocks sharply lower, with the Dow Jones industrial average tumbling more than 325 points. Muted growth in manufacturing is often seen as a sign of economic weakness, and makes some question the stock market's ­momentum.

The national index for manufacturers fell to 51.3 in January from 56.5 in December. Any index above 50 signals growth; any number below 50 suggests decline. The report "mirrors other recent [reports] which have shown weaknesses with weather and the holidays dampening demand and output," said Chad Moutray, chief economist for the National Association of Manufacturers.

Meanwhile, growth improved among Midwest factories. Creighton University reported that its business conditions index increased for a third consecutive month.

Regional results were propelled by inventory improvements and strong sales of metal products, machines and other durable goods that last more than three years.

The Creighton index grew to 57.7 in January from 53.2 in December for the nine-state Mid-America region that includes Minnesota, Iowa, Missouri, Nebraska, North Dakota, South Dakota, Kansas, Oklahoma, and Arkansas.

Midwest employment also sprung back during the month after hiring declines in December. Hiring was so strong that the region has now regained all the jobs lost during the recession, the report said. In addition, plant managers surveyed by Creighton said they expect to raise workers' pay in 2014 by an average 2.5 percent, up from an estimate of 2 percent a month ago.

Ernie Goss, director of Creighton University's Economic Forecasting Group, said his January report found "very strong growth" for the region as business services and durable goods makers performed well. Their gains offset setbacks seen by some makers of processed foods, paper ­products and other goods.

In Minnesota, the manufacturing sector grew for a 14th month as makers of medical equipment, computers, home-related products and other long-lasting goods saw sales rise. Still the overall index for the state slipped slightly to 57.7 from 58.9 in December.

Goss said he was not discouraged by the dip. "Healthy improvements among durable and nondurable goods producers are spilling over in the broader Minnesota economy. While construction activity is not back to prerecession levels, it continues to advance," Goss said.

In recent weeks and months, several Minnesota companies, including Graco, Valspar, 3M, Toro and Polaris, said they are being bolstered by renewed strength in the home and ­construction sectors.

And Bradley Holcomb, who issues the Institute for Supply Management's monthly survey, noted that all was not bad with U.S. manufacturing. Export orders grew for a 14th month and 11 of the country's 18 manufacturing sectors grew during January.

In addition, many surveyed plant managers still "reflect optimism and [see] increasing volumes in the early stages of 2014," Holcomb said. ­Sectors that did particularly well included plastics, textiles, wood, printing, metal, ­electrical equipment and transportation.

Jefferies LLC Money Market Economist Thomas Simons said that while the weather is affecting factories nationwide, he views the situation as only a temporary setback.

"We are optimistic that things will improve when the weather warms up and the snow stops falling," he said.

Dee DePass • 612-673-7725