Minnesota manufacturing holding strong despite Midwest's slow growth

Manufacturers in Minnesota and South Dakota bucked a slowdown trend that hurt most factories in the Midwest, monthly data released Monday showed.

The closely watched Creighton Mid-America Business Conditions Index fell in July to 50.6 from 53 in June.

Any number above 50 signals growth, while any index below 50 signals contraction. The drop in July's index was another sign that "pointed to slow to no economic growth over the next three to six months for the region," the report said.

Economists said many factories across the nine-state region Creighton tracks suffered from a drop in international trade, weak employment, lackluster product orders and fear that they will be hurt by the Federal Reserve Board's pending interest rate hikes.

Hundreds of manufacturers across the country, including the Midwest, reported earnings last month, noting that the high U.S. dollar stifled international sales and clipped profits.

The exceptions proved to be Minnesota and South Dakota.

Minnesota's Business Conditions Index rose to 54.8 in July from 54.3 in June as supply managers reported continued growth in orders, delivery times, inventories and employment.

Minnesota experienced a slight downturn in wages but a 1.3 percentage-point uptick in jobs.

South Dakota reported an index of 55.8 in July, down from 56.2 in June. Goss noted the figure still signified solid growth for that state, citing production of both durable and nondurable goods and even financial service firms.

To compare, North Dakota saw more woes in July due to the state's ongoing transition from oil boom to bust. Its July business conditions index remained below the neutral point of 50. At just 43.9, its index was the lowest in the region and below June's index of 44.0.

Creighton's Mid-America Business Conditions Index report tracks factories in nine states: Minnesota, North and South Dakota, Kansas, Nebraska, Arkansas, Oklahoma, Iowa and Missouri.

The overall slowdown in manufacturing growth for the region was also seen ­nationally.

Comments from surveyed supply managers "reflect a combination of optimism mixed with uncertainties about international markets and the impacts of the continuing decline in oil prices," said Bradley Holcomb, who chairs the ISM's Manufacturing Business Survey Committee.

As with June, July showed only 11 of 18 manufacturing industries with strong growth for the month. Growing sectors included textile mills, apparel, fabricated metal and electrical equipment. Industries that contracted in July included wood products, primary metals and plastics.

The national results for July were not entirely off-putting, said Dan Meckstroth, chief economist for the Manufacturers Alliance for Productivity and Innovation. He noted that the boost in production for the month "suggests activity is growing at a moderate rate."

What he found disturbing, however, was the slippage in exports.

"A major downside to the July ISM report is that the manufacturing trade deficit continues to worsen," Meckstroth said. "Imports are growing and exports are declining. The increase in the value of the dollar and the strong U.S. growth relative to other advanced economies are both unbalancing trade. Foreign trade will be a major drag on manufacturing activity and the general economy this year and next."