First in ‘Manufacturing Climate’ Study : South Dakota Is Business Hot Spot

Forget the sunshine. Florida’s manufacturing climate is falling from favor in the eyes of America’s manufacturers, and South Dakota’s star is on the rise.

In its sixth annual study of “manufacturing climates” released Monday, Alexander Grant & Co. rates 48 states (Alaska and Hawaii are not included in the study) on 22 factors manufacturers consider most important in measuring an area’s ability to offer businesses a productive environment.

Five Factors

The study covers five areas: labor costs; state and local government fiscal policies; state-regulated employment costs; availability and productivity of labor force, and other manufacturing-related issues--energy costs, environmental control and population.

South Dakota led the rankings, followed by North Dakota. Florida, No. 1 for three years straight, was No. 3.

Bringing up the rear were Michigan, Rhode Island, Maine, West Virginia and Oregon.

South Dakota has “done a pretty good job of making its business climate attractive to business,” said Selwin Price, partner-in-charge of Alexander Grant, the Chicago accounting firm.

The state posted the lowest increases in unionization, the lowest increase in wages and the lowest energy costs, a factor Price said is perhaps most significant to manufacturers considering a new facility or relocation.

“South Dakota is a quiet, rural state,” Price said, yet such companies as Citicorp, Sears, Roebuck & Co. and Minnesota Mining & Manufacturing Co. have recently begun doing business there.

While Sun Belt states and regions performed best in some of the categories, areas in the North are quickly closing the gap.

The Southeastern region--Florida, Mississippi, North Carolina, Georgia, Tennessee, Virginia, South Carolina, Alabama and Kentucky--retained its first-place ranking in the most recent study.

Of the eight regions surveyed, three of the top four are Southern.

Differences Narrow

But the study found that distinctions between the lower-ranked regions--Mideast, West, New England and Great Lakes--were not nearly as great as in previous years.

The South-Central region--Arkansas, Texas, Oklahoma and Louisiana--showed the biggest relative drop.

The accounting firm included something it calls a “quality of life” analysis, not reflected in the rankings.

Performed by the Washington-based Naisbitt Group, the analysis pinpointed such trends as jeopardy of the South-Central region’s low tax reputation, a trend toward organized labor in service and high-technology industries in the Southeastern region and growth of venture capital projects in the Great Lakes region.