Minnesota and other Midwest manufacturers take it on the chin in DecemberJanuary 6, 2016 No Comments
Strong dollar, other factors thump Minnesota, Midwest manufacturers.
Minnesota and other Midwest manufacturers slowed in December to one of the worst performances in six years due to the strong U.S. dollar and weaknesses in Canada and abroad, according to a widely watched economic report.
“Those factors will continue to squeeze U.S. and regional manufacturers,” said Ernie Goss, director of Creighton University’s Economic Forecasting Group, which produces the Mid-America Business Conditions Index.
For December, the index for the nine-state region that includes Minnesota fell to 39.6 from 40.7 in November. Minnesota’s Business Conditions Index slumped in December to 39.4 from November’s 41.1. Any index below 50 signals economic contraction. But December’s slippage marked one of the worst readings since the recession-plagued 2009.
Surveyed supply managers noted significant slowdowns in most categories, including new orders, sales, delivery lead times, inventories and employment. Food-processing firms reported the most declines, while medical equipment makers saw gains.
Economists noted that central U.S. factories laid off workers, siphoned off existing inventory and saw export orders plummet during the month.
The national manufacturing index reported Monday by the Institute of Supply Management (ISM) was also lackluster and “below growth neutral” at 48.2. The national ISM report signaled that U.S. producers were still struggling with sunken oil prices that put the brakes on new orders for equipment and supplies.
Goss said he expects the weakness in manufacturing to spill over into the broader economy during the first quarter of 2016.
Chad Moutray, chief economist for the National Association of Manufacturers, said lower energy prices have trickled down to suppliers of the energy industry. That helped take the national index down to 48.2, the “lowest level since June 2009,” he said. That’s in “sharp contrast to the modest growth seen 12 months prior to [December].” The index peaked at 58.1 in August 2014.
Hawkins Inc. of Roseville sells chemicals to oil fracking firms hard hit by steep price declines in the energy sector, and sees other customers such as food, agriculture and plastics firms with flat or declining sales, said CEO Patrick H. Hawkins.
“I don’t feel like we will have any tailwind on any specific industrial sector,” said Hawkins, who is looking to new markets for growth. “I don’t see where we will have a sudden resurgence of manufacturing growth with new plants on the drawing board for in the Midwest in 2016.”
Several Minnesota corporations, including 3M, Polaris and General Mills, signaled problems when they altered forecasts for 2015 or 2016.
Separately, Minnesota food producers suffered other setbacks last month. For example, PM Beef in southwestern Minnesota shut its Windom beef plant Dec. 11 because of industry overcapacity issues. That move cut 300 jobs. Sugar beet producers in Minnesota and North Dakota said they are challenged by a few new customer calls for sugars that come from nongenetically modified seeds.
Minnetonka-based Cargill, one of the world’s largest agribusinesses, which processes grains and beef and makes everything from fish food and chocolate to fertilizers and ethanol, has struggled in recent months with squeezed profits amid slowing demand from China, low fuel prices and the strong U.S. dollar.
The Creighton University report covers Minnesota, Iowa, Nebraska, North and South Dakota, Kansas, Missouri, Arkansas and Oklahoma.