Manufacturing growth, while still particularly strong, slowed in June as producers said they worried about the impact of U.S. trade tariffs and global trade wars.
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, prompting it to place seventh among the nine states surveyed.
Factory heads 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 the Dakotas, 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."
The possible clouds on the horizon come after a spring displaying some of the strongest manufacturing growth seen in years. May's regional index hit the 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 and national 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, non-metal minerals, printing, electrical equipment and appliances and fabricated metals.
