Strong profits, exports and staffing boosted manufacturing activity across the Midwest in August and gave economists hope for a strong finish to the year.
Midwest manufacturers enjoy August boost
Minnesota factories do well in August even as growth slows slightly
September 2, 2017 at 2:26AM
The nine-state Mid-America Business Conditions Index, a widely watched report from Creighton University, found that factory conditions and sales activity grew for a ninth consecutive month in August, rising to 57.5 from 56.1 in July, the university said Friday.
The regional increase mimicked a boost seen nationally, according to a separate report also issued Friday by the Institute for Supply Management.
Minnesota's index fell slightly in August to 61.8 from 63.2, but was still higher than the regional and national numbers, and economists were not fazed. Any index above 50 signals economic expansion.
Ernie Goss, Creighton University's Economic Forecasting Group Director, said Minnesota product makers did particularly well when it came to adding jobs.
"The state is adding manufacturing jobs at an annual pace of approximately 1 percent, and growing nonmanufacturing employment at a rate exceeding 2 percent," he said in a statement. "Our surveys over the past several months indicate this positive trend will continue for the remainder of 2017."
Factories from the nine-state Midwest region reported increases in sales, employment and inventory. Besides Minnesota, the index measures conditions in Iowa, Nebraska, North Dakota, South Dakota, Kansas, Missouri, Oklahoma and Arkansas.
A weakening U.S. dollar helped regional exports stay above the critical "growth neutral" mark of 50, the index found. However, export growth slowed slightly, falling to 52.8 from 54.3 in July.
Overall, Goss said the growth over several months "indicates a healthy regional manufacturing economy and points to solid growth for both manufacturing and nonmanufacturing for the rest of 2017."
One worry raised is how severe any changes caused by Hurricane Harvey in Houston will be. For example, already economists have raised a flag that the flow of energy and chemicals out of Texas will be affected.
Midwest factory and supply managers surveyed by Creighton said they worried that commodity exports that normally travel through the Port of Houston will be negatively affected in the weeks and months ahead. Such commodities include ethanol, hard red winter wheat, corn and soybeans.
Those exports "will be slowed by port bottlenecks in the short term," Goss said.
Minnesota-based manufacturers such as 3M, Ecolab and Pentair all have facilities in Houston that were shut down as a result of the hurricane and five days of unprecedented rain. All three companies have or will be shipping supplies into the region in an effort to help aid agencies, local officials and their employees, some of whom have lost their homes.
Goss and other economists said they expect to learn about other production increases as power companies and supply manufacturers work overtime to try to mitigate Houston's disaster.
Economists have said reverberations from Harvey will be felt well into next year as producers, ports, trucking and logistics firms respond to emergencies and scramble to resume business.
Because the storm came at the end of the month, most U.S. manufacturers didn't report an effect for the month of August.
The August national ISM Manufacturing Index rose to 58.8 in August from 56.3 in July. The August index was the highest level since April 2011 and generally beat economists' expectations, noted research analysts from Jefferies LLC.
"Forecasts [had] ranged from 49.9 to 58.9," said Jefferies money market economist Thomas Simons. He noted that factories nationwide reported increases in production, inventories, supplier deliveries and employment. Only the index for new orders dipped slightly to a still-strong index of 60.3.
Fourteen of 18 U.S. manufacturing industries reported growth in August.
The strongest increases came from U.S. producers of textiles, petroleum/coal, machinery transportation equipment, metals and electronics.
Industries reporting contractions in August included producers making apparel, leather goods, primary metals and furniture.
Dee DePass • 612-673-7725
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