Minnesota's export-heavy manufacturing sector sees slower bounceback than the nation's

Minnesota's manufacturing sector fared better last month than in May but is lagging the rest of the region and the nation, two economic indicators showed Wednesday.

An index of Minnesota's manufacturing performance, based on a regional survey of supply managers by Creighton University, rose to 45 in June from 39.8 in May. While better, anything below 50 on the 0 to 100 scale is considered contraction while above 50 indicates growth.

The manufacturing sector has not been as hard hit by the pandemic as other industries such as leisure and hospitality.

But Minnesota's manufacturers have been feeling more pain than their counterparts in other states in part because they depend more heavily on trade, which has severely curtailed during the pandemic, said Ernie Goss, who oversees Creighton's Mid-America Business Conditions Index.

"Minnesota has a larger export factor," than the other eight states in the index, he said. "Exports, particularly of durable goods, are suffering."

In addition, he said there's also some likely spillover from the slowdown at restaurants and hotels, which are bigger parts of the economy in Minnesota, because manufacturing trade shows have been canceled.

The regional index of nine states rose to 50.3 in June after three straight months of contraction, but Goss said that there is a long way to go to get to a full recovery in manufacturing.

"This is good movement, but we're not even close to being back to pre-COVID-19 levels," he said, adding that it will take many more months of positive readings to get back to where things were.

While inventories, new orders and sales rose in the regional index, job losses continued at a slightly faster pace in June compared to May.

In the survey, 51% of businesses said they expected no changes in hiring for the rest of the year.

Twenty-six percent said they would bring back furloughed workers and make new hires, while 17% said they would only bring back furloughed workers. Six percent said they expected more layoffs.

Meanwhile, a national manufacturing report compiled by the Institute for Supply Management showed that economy activity overall also grew in June after three months of contraction.

Its index rose to 52.6, up from 43.1 in May. The bounceback, which reversed some of the steep declines in April, was the largest month-to-month increase logged since August 1980.

"June signifies manufacturing entering an expected expansion cycle after the disruption caused by the coronavirus pandemic," said Timothy Fiore, chairman of the ISM manufacturing index committee.

But he added that there are some questions about whether the sector will be able to continue its momentum with some states reporting an increase in coronavirus cases in recent days.

Kavita Kumar • 612-673-4113