A majority of Minnesota manufacturers say they are seeing wholesale costs leveling off, according to a Census survey, providing long-awaited relief after more than two years of intense inflation in raw materials and equipment.

Whether that translates into price relief for consumers — or at least slower rates of inflation — remains to be seen.

For the first two weeks of March, 52% of Minnesota manufacturing firms reported no change in input prices, according to the biweekly Business Trends and Outlook Survey taken by the U.S. Census Bureau.

It's a promising sign when coupled with February's producer price index, released this week. That national index showed wholesale prices for all businesses unexpectedly fell slightly.

The producer price index tracks inflation experienced by businesses and is often seen as a precursor to what happens with consumer prices. As the prices of manufacturing inputs have plateaued in recent months, those savings could eventually be passed along.

"Some things have stabilized, but I'm still seeing quotes for materials that are only good for a couple of weeks," Bruce Roles, a Minnesota-based manufacturing operations expert, said. "Which means there's still price instability out there."

Wholesale material costs for U.S. manufacturing firms are still 27% higher on average than they were in February 2020, according to the Bureau of Labor Statistics. Over the previous three years, input costs rose just 5%.

"From the manufacturers' standpoint it's very welcome news," Chad Moutray, chief economist for the National Association of Manufacturers, said. "They were seeing profits squeezed significantly, and firms were not able to pass on much of that cost to consumers."

Pandemic-related challenges with staffing, transportation and shifting demand continue to create bottlenecks in global supply chains.

"Some supply chain bottlenecks have improved or are moving in the right direction," Moutray said. "The number one issue for manufacturers is workforce."

Suppliers, manufacturers and retailers are also dealing with excess inventory, in many cases.

"You hear stories of companies that couldn't get what they needed, so when they finally did, they got a lot of it," Roles said. "Then that comes around to some softening in the economy, stuff is more readily available, and now everyone has inventory on their hands."

Up to 75% of Minnesota businesses routinely reported higher input costs last summer and into last fall before the trend turned toward more stable prices this winter, the Census survey shows. But 60% of Minnesota businesses surveyed expect higher costs to come as interest rates rise further, confidence in the banking industry teeters and demand from China grows — potentially straining supplies again.

"I don't think there's a systemic risk, but moving forward manufacturers are very focused on how all of this will impact access to credit and the overall business cycle," Moutray said.

Meanwhile, the Federal Reserve's industrial production index showed a 1% annual decline in manufacturing output in February. Nationally, the industry has roughly the same level of production as in 2017, though capacity has grown and is trending above the 50-year average.

"We saw a tremendous amount of growth over the last couple of years," Moutray said. "Yes, we've pulled back, but it's from a pretty strong base."