Mankato economy slows some, but businesses still bullish

The lingering effects of inflation and higher interest rates have put a dent in the local economy, but businesses appear to see it as a bump in the road rather than a worrisome downturn.

"Revenues are down, but businesses don't seem discouraged about it," said Ryan Vesey , business development director at Greater Mankato Growth, who closely follows weekly and monthly economic data for the Greater Mankato area.

"What I see is that they're not discouraged because they've been up so high, and they know there are ups and downs and they're not too worried about somewhat of a dip."

Rick Liskow , owner of Minnesota Hot Tubs in Mankato and other locations in the state, said the Mankato area is a vibrant market.

"In Mankato , our numbers are up because the economy has been spurred by a lot of things, the Walmart distribution center, Federated (Insurance) hiring a lot of people and other things. It seems like the town is on the growth cycle."

Liskow said Mankato has a good regional location.

"We pull from northern Iowa , out to Redwood Falls , Hutchinson , Le Sueur , Waseca . It's a good regional draw."

Max DeMars , of DeMars Construction , said higher interest rates have slowed development some.

"But there are projects in the queue. It's all about timing right now. It takes some time to run through the financing," he said.

"It seems like interest rates are trending down, which is good. It's nice to see some more balance."

Dana Schnepf , owner of D&K Powder Coating in North Mankato , said he knows things have slowed, but his business has been fortunate.

"We've been hearing about an economic slowdown and things being flat for the past year. But, personally, we are up 35%. I'm not sure if that's the local economy or just our customer base, but what we're seeing isn't common."

D&K paints items for a wide variety of sectors. Schnepf said one area they've seen a deep decline is painting parts for electric vehicles.

"A few years ago we were doing gangbusters on parts for electric vehicles. That's gone. The manufacturers and dealers are backing out of (electric vehicles.) That sector is almost nonexistent now."

He said their big customer base is the local companies that make generators. "Backup generators for data centers — Google, Meta, Verizon — those are very strong."

He said the higher interest rates have hit everyone.

"That definitely has a negative impact. I carry a big loan load, so that has a big impact. The recent ( Federal Reserve ) decrease of a half percent (interest rate) and another expected half percent later this year is good. And odds makers are saying another percent (cut) next year. That will make a huge difference."

DeMars said he thinks residential housing will continue to be the big focus locally in coming years.

He's just finishing up on renovating the former Norwood Inn in North Mankato into the Forde apartment complex. The complex is already 98% occupied.

He is now focusing on adding commercial spaces on the property for retail and restaurants.

While things have slowed, DeMars said the ongoing development along Highway 169 , in downtown Mankato , on Madison Avenue and on the rest of the hilltop are good signs of a strong local economy.

Vesey said the local area reflects what was found in a recent Federal Reserve survey that showed the overall economy has slowed, but it's simply coming down from an unnaturally high point.

"There was so much money flowing into the economy (during and just after the pandemic). I think businesses realized that was going to end."

He said a national election also typically depresses the economy as people wait to see what happens.

Vesey said many of the large companies locally also say their customers stocked up on things when there were concerns with the supply chain and now are waiting to work through that high inventory before they buy more.

Still, he said there are good signs in the local economy.

"We're still seeing businesses expand and locate here."

He said the local area has also proven to be a strong draw for distribution centers, including the now expanding Walmart distribution center in Mankato and the Gordini's distribution center in North Mankato . He said the success is interesting in that Mankato is not on an interstate.

Vesey said it's hard to track local retail businesses but said it seems boutique and niche businesses seem to do better than some other retail.

He said local manufacturers are saying they are being more intentional on which open positions they fill, but that they are not talking about laying off any employees. "There are companies that are looking to grow. We're fortunate to have such diversity (in manufacturing)."

Vesey notes the Mankato area continues to grow in population, but he's seen one piece of data that has him a bit puzzled.

"A significant amount of our new resident growth is coming from Omaha ( Nebraska ). We invested in a migration tool that shows us monthly migration trends. Over the year, it shows 100 people from Omaha moving in (to Mankato .) That doesn't sound like a lot, but for a city our size to have that many move here is something."

Vesey says he doesn't know what is driving the Omaha -to- Mankato pipeline.

"I'd like to hear from people who moved from Omaha and see if there's a consistent reason."