Manufacturing conditions across the Midwest and Minnesota improved for an 18th consecutive month and hit highs not seen in 14 years, according to a widely watched economic report issued Friday by Creighton University.
The nine-state Creighton Mid-America Business Conditions index expanded to a "robust" 67.3 in May. That was up from 64.5 in April amid growth in employment, new orders and production, plus strong results for exports and inventory purchases.
In Minnesota, the May index rose to 64.2 from April's 63.6. Any index above 50 signals economic expansion. As a result, May's report signaled welcome news about the state of the Midwest manufacturing economy. The Creighton report tracks factory progress for Minnesota, Iowa, Kansas, Missouri, Nebraska, North Dakota, South Dakota, Arkansas and Oklahoma.
The index "jumped to its highest level in 14 years pointing to strong growth for the next three to six months," said Ernie Goss, director of Creighton's Economic Forecasting Group.
While May's report was positive news, Goss noted the survey of manufacturing executives was conducted before this week's news that the U.S. will invoke new tariffs on steel and aluminum imported from Europe, Canada and Mexico, prompting countermoves against U.S. producers of a variety of goods.
Retaliatory trade wars are likely to affect Midwest manufacturers, Goss said.
"The Goldilocks economy, not too hot, not too cold, will be tested in the months ahead as trade skirmishes and potential trade wars slow growth and contribute to higher prices for inputs such as steel and aluminum. These higher prices will slow growth and push the Federal Reserve to be more aggressive in raising interest rates in the weeks and months ahead," Goss said.
In Minnesota, which has one of the largest iron ore deposits in the country, mining companies celebrated the news of the tariffs. But other manufacturers, especially those relying on steel imported from Canada — Minnesota's largest trading partner — complained that raw-material costs will spike as Canadian steel suppliers retaliate by increasing prices in response to President Donald Trump's tariffs.
The U.S. tariffs call for a 25 percent tax on imported steel and a 10 percent tax on aluminum.
Excluding those pressures, however, factory heads surveyed last month said they were pleased about growing orders, but concerned about rising inflation, hiring challenges and data security issues.
A separate report, also issued Friday, found economic conditions for U.S. manufacturers in May grew for a 109th month.
According to the Institute for Supply Management (ISM), May's index rose 1.4 percentage points to 58.7 amid a jump in new factory orders, production, hiring, prices and supplier deliveries.
In all, 16 of the nation's 18 manufacturing industries reported growth in May. Leading contributors included makers of textiles, nonmetallic mineral products, electrical equipment and appliances, printed goods, metal products, furniture and machinery.
Timothy Fiore, chairman of the ISM Manufacturing Business Survey Committee said in a statement that comments from surveyed factory heads from around the country "reflect continued expanding business strength. Demand remains strong, with the new orders index at 60 or above for the 13th straight month."