Nebraska-Based Survey Suggests Midwest Economy Is Improving

The February Business Conditions Index for the Mid-America region, a leading economic indicator from a survey of supply managers in a nine-state area, rose for a third straight month pointing to improving economic growth in the months ahead, according to researchers at Nebraska-based Creighton University.

The index expanded to 61.0 from 54.7 in January and 50.3 in December. The index ranges from zero to 100. Any score above 50 suggests economic growth in the next three to six months. Conversely, a score below 50 suggests a contracting economy in coming months.

Some of the findings of the Midwest study include:

• Leading economic indicator climbs to highest level in almost three years.
• Job gains were reported for two straight months for the first time since July 2007.
• Almost 30 percent of supply mangers expect prices to increase by more than 5 percent in the next six months. Less than 2 percent expect prices to decline.
• Inventories expanded for the first time since September 2008.

For February, 23 percent of supply managers reported job gains for their firms while only 11 percent indicated that their firms reduced employment.

“This is the first time that we have recorded two straight months of employment indices above growth neutral since July 2007. Despite this upturn, the regional labor market remains fragile with any upturn in hiring susceptible to national and global economic slumps,” said Dr. Ernie Goss, director of Creighton’s Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics.

Prices appear to be rising for raw materials and supplies, however. The prices-paid index, which tracks the cost of raw materials and supplies, moved above growth neutral for a ninth straight month to 78.3 from January’s 75.5 and December’s 65.2.

Looking ahead six months, economic optimism, captured by the February confidence index, climbed to a strong 73.0 from January’s 68.5 and December’s 69.5.

“Record low interest rates, a stabilizing job market and the January improvement in the nation’s unemployment rate buoyed the economic optimism of supply managers in the Mid-America region,” said Goss.

An improving global economy continues to push exports higher. New export orders slipped to a still healthy 55.4 from 55.8 in January. The improving regional economy likewise rocketed imports to a higher 58.8 from January’s 50.0.

For the first time since September 2008, supply managers in the nine-state region increased their inventory levels. The February inventory index rose to 57.4 from January’s 48.3 and December’s 39.2.

Other components of the February Business Conditions Index were new orders at 66.1, up from January’s 57.4; production or sales at 67.3, up from 57.9; and delivery lead time unchanged from January’s 58.4.

The Creighton Economic Forecasting Group has conducted the monthly survey of supply managers in nine states since 1994 to produce leading economic indicators of the Mid-America economy. States included in the survey are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.

Sources: Creighton Economic Forecasting Group: http://www.outlook-economic.com; Associated Press