Slow climb for factories continues, surveys say

Two widely read benchmarks of manufacturing activity released Monday provided more signs that factories are ramping up production as the economy continues its gradual recovery.

Increases in production, new orders and employment helped the U.S. manufacturing sector grow for the ninth straight month in April, according to the Institute for Supply Management (ISM). The organization's manufacturing index, based on interviews with hundreds of businesses nationwide, hit 60.4 in April compared with 59.6 in March. It was the highest reading since July 2004. A reading above 50 indicates growth.

A similar study of a nine-state Mid-America region that includes Minnesota also showed continued economic growth in April although at a slightly less robust level from March. The index, overseen by economics Prof. Ernie Goss at Creighton University in Omaha, was 61.7 in April compared with 64.3 in March.

Minnesota's overall figures in the Creighton study also were down slightly from March but continued to show manufacturing sector growth. The state's business conditions index was 62.4 in April compared with 62.5 in March and is up considerably from April 2009 when it was 42.6. Goss said he expects Minnesota's jobless rate to remain relatively unchanged in the second quarter and that it could be the second or third quarter of 2011 before the state regains jobs that have been lost in the recession.

"Unlike North Dakota, whose economy didn't fall as much in the recession, Minnesota was affected much more by problems in the banking industry, housing and commercial real estate and the general manufacturing downturn," Goss said. "The comparisons [for Minnesota] look good now, but there's still more room to grow."

None of the 18 manufacturing industry sectors in the ISM study showed contraction in April. Apparel and leather products showed the strongest growth. Nonmetallic mineral products, wood products and petroleum and coal were also strong.

The ISM's employment index rose for the fifth straight month to 58.5, compared with 55.1 in March. The new orders index hit 65.7, up from 61.5 in March. The export index slipped to 61, compared with 61.5 in March, which was a 20-year high.

The Creighton index that measures prices paid for raw material and supplies showed growth for the 11th straight month, rising to 81.2 from 80.5 in March for the Mid-America region. Goss noted that index had more than doubled over the past year. Almost one-third of the supply managers responding to the Creighton survey said they expected price increases of more than 6 percent in raw materials in the next six months.

Even so, Creighton survey respondents continue to have a positive outlook on the economy. Economic optimism, captured by the April confidence index, rose to a strong 72.9 from March's 70.1. "Even though employers face too much uncertainty to more aggressively hire, record low interest rates, a stabilizing job market and recent declines in the nation's unemployment rate are supporting economic optimism of supply managers in the Mid-America region," said Goss.