Surveys: Slow going for manufacturers

The manufacturing sector still had a pulse in August, but it got considerably weaker along with the stock market and general confidence in the nation's economy.

Two widely watched benchmarks of manufacturing activity released Thursday showed their lowest rates of growth in several months. One of them, a survey by the Institute for Supply Management (ISM), inched closer to showing no growth at all.

The ISM index, based on interviews with hundreds of manufacturers nationwide, fell to 50.6 in August compared with 50.9 in July. A reading of 50 or higher indicates growth.

A component of the ISM index that measures production fell below 50, the first sign of actual contraction since May 2009. Another component that measures new orders was below 50 for the second straight month, an indication that the situation is unlikely to improve anytime soon.

"The overall sentiment is one of concern and caution over the domestic and international economic environment, which is affecting customers' confidence and willingness to place orders, at least in the short term," said Bradley Holcomb, chairman of the ISM's survey committee.

The sentiment was echoed by a similar study that covers a nine-state mid-America region that includes Minnesota. That index, overseen by Prof. Ernie Goss at Creighton University, fell to 52 in August versus 54.1 in July.

Its "confidence index" -- which measures respondents' opinions of short-term economic trends -- was below 50 for the second consecutive month, a level not seen since the 2008-09 recession. The study's employment index fell below 50 after 19 months above the neutral mark.

The two studies reflect other recent signs of growing economic unease. Major stock market indices fell in August, and two measures of consumer confidence -- the Thomson Reuters/University of Michigan Index and the Conference Board's Index -- dropped to their lowest levels in more than two years.

Agriculture helps

The predominance of farm-related manufacturers has bolstered the regional study's results in recent months.

Minnesota's manufacturers are among those benefitting from the strong agricultural economy, according to Bob Kill, whose nonprofit consulting organization Enterprise Minnesota works mostly with small and medium-sized businesses.

Goss noted that medical equipment and metal product manufacturers in the state are also showing healthy rates of growth. "I also think Minnesota is helped by the diversity we have in manufacturing," Goss said.

Kill said companies that invested in growth during the recession are continuing to perform well. That appears to be the case at Delkor Systems Inc., where new products are fueling increased sales and hiring, according to President Dale Anderson.

Circle Pines-based Delkor makes packaging equipment for a variety of industries, with food companies accounting for a major part of its business. Anderson said Delkor has added eight new packaging machines over the last year. The company has added 15 employees to its 120-person workforce since the first of the year and anticipates hiring about five more in the next few months.

Josh Bushard, manufacturing leader at Grant Thornton's Minneapolis office, said he sees little hiring among midsized companies.

"They're investing in technology and equipment to maintain profitability," he said. "But they are still very cautious about adding people."