After 32 months of growth, manufacturing conditions slumped sharply across America's central states in August as factories wrestled with trade tariffs, slowing sales, and declining exports, employment, and business confidence, according to a widely watched economics report released Tuesday by Creighton University.
For the first time in nearly three years, Creighton's nine-state Mid-America Business Conditions Index fell to 49.3 last month, below the threshold of 50, signaling economic contraction.
Creighton's regional Mid-America Business Conditions Index tracks nine states including Minnesota, Iowa, the Dakotas and Nebraska. In July, the regional index was 52.
Minnesota's index fared even worse, falling to 48.6 in August from 51.7 in July as sales, inventories and employment totals fell. Over the last 12 months, Minnesota's nondurable goods producers have lagged manufacturers of durable or long-lasting goods, Creighton economists found.
But weaknesses were not contained to Minnesota alone, according to the Creighton report that also tracks Missouri, Kansas, Oklahoma and Arkansas.
"Weakness in the (entire nine-state) region's farm and manufacturing sectors produced by tariffs and a global economic slowdown pulled regional growth below that of the nation," said Ernie Goss, director of Creighton University's Economic Forecasting Group. "Based on our manufacturing survey over the past several months, I expect overall growth to slow and potentially move into negative territory in the months ahead."
Goss said surveyed factory heads continue to complain about worker shortages and a slowdown in sales.
Roughly 44% of supply managers said trade tariffs were their "greatest economic challenge for the next 12 months." The Creighton report found that the "new export orders index" sank to a dismal 39.6. That's down from July's 44.7. The region's "import index" also slumped, but just to 42.3 from 43.8 in July.
Many Minnesota-based manufacturers reported that the escalating U.S. trade war with China and other nations increased internal supply chain costs and disrupted supply flows. They responded by increasing product prices to offset higher costs. Aside from trade tariffs, a host of companies reported slowing product demand from customers in China, Japan and Europe.
3M, Graco, and H.B. Fuller all saw lackluster sales growth or falling profits during their recently reported second quarters.
In July, 3M Co. reported that its customers and even some of its own factories are beginning to slow production and use up excess product inventories as a means to control costs.
