With much needed boosts to sales and new orders, Midwest manufacturers said they returned to solid growth in January.
It was the second month in a row that manufacturing conditions improved in nine Midwestern states surveyed by Creighton University in it Mid-America Business Conditions Index.
Manufacturing nationwide also rebounded, with factories reporting to the Institute for Supply Management that on average they returned to growth. In December, the national index was 47.8; in January, it rose to 50.9. Anything above 50 signals expansion.
The Mid-America index showed brisker growth, with its index in January leaping to 57.2 from 50.6 in December. The index was at its highest point in almost a year.
The survey findings landed Monday, just after several multinational companies such as 3M, Polaris and Graco recently reported fourth quarter results that were mixed, signaling domestic sales increases but in several cases the continued slowdown of business from China and sectors such as auto, aerospace and industrial.
Creighton’s January surveys were conducted before the coronavirus outbreak in China fully hit and therefore do not include impacts from what has developed into a growing international health crisis, university officials said.
The Creighton report — which tracks factory conditions across Minnesota, Iowa, Missouri, Kansas, Nebraska, North Dakota, South Dakota, and Arkansas and Oklahoma — did see an unexpected uptick in employment in January, following months of complaints that trade tariffs and the inability to find and hire workers was severely hampering job growth.
“January’s positive employment reading was a positive and unexpected outcome,” said Ernie Goss, director of Creighton’s Economic Forecasting Group. “The weakness in the region’s manufacturing and agriculture sector (had) spilled over into the broader regional economy. Over the past 12 months, the Mid-America region has added jobs at (only) a 0.6 percent pace. (That’s) less than half the 1.4 percent rate of the U.S. economy.”
Other positives for the region included increases in inventories and export orders, even as imports sank dramatically during January.
Supply managers reported enhanced confidence levels for the month that were aided by January’s passage of the new trade agreement among the United States, Mexico and Canada (USMCA), as well as the signing of the “Phase 1” trade agreement with China.
Nearly a third of all factory managers Creighton surveyed reported that shifting U.S. trade policies and resulting trade war caused them to change international vendors and disrupt traditional supply chains.
While it is too soon to see actual sales results from the new trade agreements, factory heads reported feeling more confident the future. “Approximately 56 percent of supply managers expect USMCA and Phase 1 Chinese agreement to have a positive impact on their business prospects,” Goss said.
