Midwest manufacturing grew for a 14th consecutive month in January, but at a slightly slower pace than the prior month amid slowing exports and employment and rising wholesale prices.
Creighton’s Mid-America Business Conditions Index — which measures growth in nine states, including Minnesota — was a respectable 57.3 in January, but down from December’s robust index of 59. Any index above 50 signals growth, so economists were not alarmed by the slight decline.
In Minnesota, the January index slipped to a “still healthy” 55.8 from December’s 56.8. Managers rated new orders and production particularly strong, but saw a high drop in delivery lead times. That dip was evident across the region.
“Growth was balanced and healthy for durable and nondurable goods producers in the state,” said Ernie Goss, director of Creighton’s Economic Forecasting Group. “While manufacturing growth has been below that of the region, it has been less volatile” and consistently healthy for months.
Last month, producers from the nine-state region reported that wholesale prices were rising enough to possibly prompt the Federal Reserve to raise interest rates during the first half of the year, the survey respondents said.
Creighton also found that new product orders, exports and factory hiring continued to grow in the region, but not quite as aggressively as during December.
At the same time, factory production, inventory and confidence levels swelled for the region that also includes Iowa, Nebraska, Missouri, Kansas, North Dakota, South Dakota, Oklahoma and Arkansas.
“The durable, nondurable and nonmanufacturing sectors in the region are adding jobs at a solid pace,” Goss said. “Both the national and our regional indices indicate the manufacturing sector is advancing at a very healthy pace and will continue to spill over into the broader national and regional economies in the next three to six months.”
The Creighton report comes just as major producers such as 3M, Caterpillar, Graco and Polaris Industries all reported strong quarterly results. It also lands in the midst of a still charging stock market and recent tax law changes that will lower most manufacturer’s future tax rates.
Nationally, the Institute for Supply Management reported Thursday that producers nationwide also grew during January, but at a slightly slower rate than December. As a result, January’s business index was 59.1, down from 59.3 the prior month. ISM reported that U.S. producers reported overall growth but small slips in production and employment and supply deliveries. In contrast, indexes rose in January for prices, inventories, new order backlogs and lead times for capital projects.
Timothy Fiore, chair of ISM’s Manufacturing Business Survey Committee, noted that 14 of the nation’s 18 manufacturing industries grew during the month, led by textile mills, fabricated and primary metals, plastics and rubber, machinery, and transportation equipment.