Midwest manufacturers continue to grow, though levels slip in Minnesota

Midwest manufacturers grew again for a 13th consecutive month in December and posted the highest business-confidence levels reported in nearly seven years, according to a monthly economics index by Creighton University.

The nine-state Mid-America Business Conditions Index, which includes Minnesota, grew to 59 from 57.2 in November. Numbers above 50 signal economic expansion.

The index in Minnesota dropped a bit, however, and respondents expressed concern over ongoing efforts to revise the North American Free Trade Agreement (NAFTA).

Surveyed supply and purchasing managers across the region reported that "economic optimism" or business confidence shot to an index of 73.2 from 71.9 in November.

Midwest factories enjoyed increases in new orders, hiring, inventories and delivery speeds even as trade slowed in December. Confidence rose despite concerns about worker shortages and foreign competition, the report showed.

In Minnesota, the Business Conditions Index dipped slightly to 56.8 in December from 57.8 in November as delivery lead times and inventories declined, while new orders and sales posted strong growth.

Ernie Goss, director of Creighton University's Economic Forecasting Group, described the Midwest's overall manufacturing sector as "healthy" following a challenging 2016. Goss's report tracks factory progress in nine states: Minnesota, Iowa, Missouri, Kansas, Nebraska, South Dakota, North Dakota, Oklahoma and Arkansas.

Even so, the surveys and report revealed key issues to watch in the coming months.

The regional index for "new export orders" declined in December to a still-strong 63.9 from 65.8 in November.

About 22 percent of surveyed factory officials in the region expressed concern about the possible abolition of NAFTA. The elimination of the agreement is a possible policy change championed at various times by President Donald Trump.

Local businesses dependent on trade across the continent are watching closely to see if Trump pursues a NAFTA change agenda this year. Big money is potentially at risk, they said.

The Creighton report found that factories in the central core of the country exported $35.4 billion of goods just to Canada and Mexico in 2016, which supported 210,000 U.S. jobs. In Minnesota alone, businesses and farms exported $6.4 billion in goods to Canada and Mexico with the help of 38,000 workers, making NAFTA a key issue.

A national manufacturing report is expected to be released Wednesday by the Institute for Supply Management (ISM).

David Kelly, JPMorgan Chase's chief global strategist, said in a note to investors Tuesday that preliminary ISM findings suggest that the report will be positive.

"Early numbers for December suggest the aggregate global manufacturing purchase managers index may have hit a fresh six-and-a-half year high at the end of last year," Kelly said. "This will be important to watch all year long, in part because of its impact on U.S. growth, but more importantly because of what it signals in terms of opportunities in global equities for U.S. investors."