After two months of declines, index shows Minnesota and Midwest manufacturing return to growth

After two difficult months, manufacturing across Minnesota and other central states returned to growth in October, outpacing national results that continue to show declining factory conditions for much of the nation, according to a widely watched economic report issued Friday by Creighton University.

Creighton's Mid-America Business Conditions Index for Minnesota and eight other states rose to 52.6 last month. That was up from 49.1 in September and 49.3 in August.

Minnesota's October factory index jumped to 51.3, up from 48.4 in September.

Regional results fared better than Friday's national report by the Institute for Supply Management (ISM), which showed U.S. producers at an October index of 48.3.

Because any index below 50 signals economic contraction, economists have worried that late summer and fall regional declines might signal the start of a manufacturing recession.

Friday's regional numbers brought some relief, but comments by factory heads across the Midwest suggested that difficulties continue.

The Creighton report showed that while employment, sales, and new orders grew in October, exports, imports, inventories, delivery speeds and business confidence remained contracted. The mixed monthly report proved the manufacturing sector is not fully on stable ground.

Goss added that October's survey of regional supply managers indicated that factory growth "is likely to bottom [out] at a positive but slow rate in fourth quarter of this year."

Creighton's report tracks manufacturing conditions in nine states: Minnesota, Iowa, Missouri, Kansas, Nebraska, South Dakota, North Dakota, Oklahoma and Arkansas.

About 60% of supply managers reported that U.S. trade tariffs had raised supply prices, disrupted supply chains and increased overall costs. Still, most producers (54%) surveyed said they supported short-term tariffs, noting that they might eventually help normalize trade conditions long term.

Creighton's report comes at the same time that many multinational manufacturers are issuing third-quarter earnings results revealing sales declines, weak demand from China and Germany, troubles with unfavorable currency exchange rates, labor shortages and inflated costs stemming from U.S. trade tariffs.

Many manufacturers, including 3M and Ecolab, have focused on cost-cutting and efficiency measures to help boost profits. Both companies recently lowered their forecasts for full-year 2019.

Only five of 18 U.S. manufacturing sectors grew in October, according to Friday's ISM report. Those shrinking the most included primary metal, apparel, textile and transportation-equipment makers.

In contrast, growth was led by makers of furniture, printing products, food/beverage/tobacco, wood products, and computers and electronics.

"Overall, sentiment [in October] remains cautious regarding near-term growth," ISM Manufacturing Survey Committee Chairman Timothy Fiore said in a statement. "Global trade remains the most significant cross-industry issue. Food, Beverage & Tobacco Products remains the strongest industry sector and Transportation Equipment the weakest sector."