Economist: Midwest Economy Improves

A survey of business leaders in nine Midwestern and Plains states suggests that the region’s economy continues to show signs of improvement, but job losses persist.

The Mid-America Business Conditions index released July 1 rose to its highest level since September of last year, to 49.3 in June from 46.6 in May.

The survey’s index ranges between 0 and 100, and any score below 50 on the index suggests a contracting economy over the next three to six months.

While the increase was the index’s fifth straight jump, it also shows the region lost jobs for the 17th time in the past 18 months.

“Readings over the past several months indicate that the regional economy has bottomed out,” said Creighton University economics professor Ernie Goss, who oversees the survey. “However, as in past recessions, job creation is just not in the picture for the immediate future.”

The survey covers the states of Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.

The June employment index inched up to 41.4 from May’s 40.5. Survey authors said government data show that except for North Dakota, each state in the region has experienced job losses and rising unemployment over the past three months.

“The region is now matching the nation in the pace of job losses,” Goss said. “The nine-state region is losing jobs at an annualized rate of roughly 4 percent. Even as regional economic activity picks up in the second half of 2009, the rate of job losses will continue with rising unemployment rates for most states in the region.”

Goss said the survey shows prices for raw materials and supplies have increased – a sign he believes points to the likelihood of higher inflation by mid-2010.

“I expect to see higher interest rates from the Fed before the end of 2009 as they move to combat rising inflationary pressures,” Goss said.

Looking ahead six months, economic optimism in June increased for the fifth straight month to its highest level since February 2005. The index rose to 67.7 from May’s 65.9 – far above last November’s record low of 22.4.

May’s overall index also had new orders at 53.4, down from 55.1 in May; production at 54, up from 51; and delivery lead time at 51, up from 46.8.

Goss and the Creighton Economic Forecasting Group have conducted the monthly survey since 1994.

The Institute for Supply Management, formerly the Purchasing Management Association, began to formally survey its membership in 1931 to gauge business conditions. The Creighton Economic Forecasting Group uses the same methodology as the national survey.

On the Net: Creighton Economic Forecasting Group: www.outlook-economic.com