Regional manufacturing economy grows, but job losses continue

Manufacturing activity increased in October, signaling modest growth despite continued job losses and pressure from tariffs, according to Creighton University’s Mid-America Business Conditions Index..The index, which covers states stretching from Minnesota to Arkansas, increased to 50.5 in October from 49.8 in September. A reading above 50 indicates growth.“The regional manufacturing economy continues to move essentially sideways with elevated wholesale inflation,” said Ernie Goss, director of Creighton’s Economic Forecasting Group. “Supply managers reported weakness in both imports and exports along with higher prices for imported goods.”The index tracking economic optimism for the next six months increased four points to 42.2. Only 21 percent of supply managers anticipate economic conditions will improve for their firm over the next six months. “Concerns regarding tariffs, inflation and slowing business activity restrained supply managers’ economic expectations,” Goss said. The regional employment index increased two points to 46.9, its seventh straight month of being below growth neutral, as 16 percent of firms reported layoffs in October. The region’s insured unemployment rate was 0.7 percent, up from 0.6 percent a year earlier. Overall U.S. unemployment increased in August to 4.3 percent from 4.2 percent in July. The Bureau of Labor Statistics did not release unemployment figures last month due to the government shutdown. Tariffs continued to weigh heavily on manufacturers, according to the report. Supply managers said tariffs raised input prices by 7.9 percent this year, and more than half of firms that purchase materials abroad re-shored part of their supply chains. Thirty-five percent of respondents said they agreed with President Trump’s tariff policy. Trade activity weakened for the sixth straight month, with the new export orders index dropping to 40.8 and imports falling to 34.0. During Trump’s second term, the average tariff percentage the United States charges on imports increased to 27 percent — its highest mark in more than 100 years — from 2.5 percent. The rate dropped to 17.9 percent in September. To hedge against future tariff increases, firms modestly expanded inventories, pushing that index up 1.7 points to 50.3.“Recent retaliation from higher U.S. tariffs and trade restrictions pushed imports and exports lower,” Goss said.The price index remained elevated at 62.9 from 64.1, signaling continued inflation. The Consumer Price Index increased 0.3 percent in September and 3 percent on an annualized basis, according to the Bureau of Labor Statistics. Goss expects the Federal Reserve to cut interest rates next month to improve slowing economic growth.