Manufacturing growth, while still strong, slowed some in June as producers said they worried about the impact of U.S. trade tariffs and global trade wars.
Midwest manufacturing growth slows, but still strong
Minnesota, Midwest saw an increase in June, but the rate has slowed.
July 3, 2018 at 1:13AM
The monthly Mid-America Business Conditions Index, produced by Creighton University, tracks factory conditions in Minnesota and eight other central states. Results for June showed the growth index at 61.8, down from an unusually robust 67.3 in May but still far above the neutral growth 50.
Minnesota's index fell to 58.8 from 64.2 in May, putting it seventh among the nine states surveyed.
Factory leaders in June said they experienced slower growth in product orders, employment, confidence levels and trade, while simultaneously realizing a surge in wholesale prices. On the plus side, producers expanded inventories in June.
"Despite trade tensions and skirmishes, healthy profit growth, still-low interest rates, and lower tax rates, supported a robust business confidence," said Creighton Economic Forecasting Group Director Ernie Goss.
Economists noted that plant managers remained somewhat optimistic despite questions about how new U.S. trade tariffs and retaliation from U.S. trade partners in China, Canada, Mexico, Japan and Europe might impact business in the future.
The manufacturing confidence index fell to 59.8 in June from 66.3 in May for the region, which also includes North Dakota, South Dakota, Iowa, Missouri, Kansas, Nebraska, Oklahoma and Arkansas.
"The regional economy continues to expand at a very healthy pace with manufacturing growth of approximately 2.5 percent over the past 12 months," Goss said. "However, I expect expanding tariffs, trade restrictions and rising oil prices to slow growth and push inflation into a range leading to more aggressive Federal Reserve rate hikes."
Minnesota Trade Office officials estimate that new retaliatory tariffs that went into effect Sunday will cost Minnesota producers alone an extra $640 million in taxes per year. The impact is expected to be biggest on companies that export iron ore, pork, soybeans and other grains and cereals.
The possible clouds on the horizon come after a spring that brought some of the strongest manufacturing growth in years. Creighton's May regional index hit its highest level in 14 years.
Monday's regional report also precedes corporate earnings reports that are due out later this month from manufacturing dynamos such as 3M, Pentair, Polaris, Graco and Sleep Number.
In a separate report issued Monday, the Institute of Supply Management found that the June index for U.S. factories rose slightly in June to 60.2 from 58.7 percent in May.
The slight uptick came as U.S. factories saw increases in production, supply deliveries and exports, even as total new orders and employment dipped. In all, 17 of 18 manufacturing industries grew during June, led by textiles, wood, nonmetal minerals, printing, electrical equipment and appliances and fabricated metals.
Dee DePass • 612-673-7725
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