OMAHA, Neb. — A survey of business executives in nine Midwestern and Plains states suggests their state economies are humming right along, despite wholesale inflationary pressures.
A report released Thursday said the Mid-American Business Conditions Index rose in April to 55.5 from 54.3 in March.
Any score greater than 50 on the index, which ranges between 0 and 100, indicates an expanding economy over the next three to six months.
Creighton University economics professor Ernie Goss, who oversees the report, said the region is “clearly outperforming the rest of the nation.”
“Very strong farm income and biofuels production continue to push the regional economy higher,” Goss said. “Furthermore, the downturn in housing is having less of an impact for most of the nine-state region than for the rest of the nation.”
The nine states are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.
Despite the relatively good news in the region, the survey respondents’ outlook for the next six months remained collectively gloomy: The survey’s confidence index slumped in April to 29.4, also a record low since the survey began in 1994, from a dour 38.0 in March.
“Despite an improving regional economy, supply managers’ outlook has been undermined by the national downturn in housing, elevated inflationary pressures and the subprime mortgage crisis,” Goss said. “For this part of the nation, the prime negative driver is record high oil prices.”
His gauge for wholesale inflation hit a survey record last month: 93.1, compared with 90.3 in March and 88.8 in February.
Goss noted that the Federal Reserve cut short-term rates a quarter point Wednesday.
“In my judgment, current inflationary pressures in the pipeline will force the Fed to forgo any more rate cuts for 2008,” Goss said. “Despite a very weak national economy, inflation is the most ominous problem facing the Fed.”
Contrary to most components in the April survey, Goss said, the monthly employment index dropped below growth neutral to 49.0, compared with 52.4 in March and 48.9 in February.
“April’s job weakness was in value-added services,” Goss said. “Expansions in exports pushed manufacturing job growth into a healthy zone for the month.
“The cheap dollar, which is making U.S. goods less expensive among our trading partners, pushed the new export orders index to a healthy 56.6, down slightly from March’s 57.5,” he said.
“Though the weak dollar has increased the price of imported goods such as oil, it has failed to restrain imports to any great degree, with an import reading of 55.3, down slightly from 57.9 in March but up from February’s 52.1.”
Other components of April’s overall index were:
• new orders at 55.0, down from March’s 55.8
• production at 55.0, down from 57.7 in March
• inventories at 56.4, up from 56.3 last month
• and delivery lead time at 59.2, up dramatically from 46.7 in March
The Creighton Economic Forecasting Group has 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 group uses the same methodology as the national survey.
The Institute for Supply Management, formerly the Purchasing Management Association, began formally surveying its membership in 1931 to gauge business conditions.
The Creighton Economic Forecasting Group uses the same methodology as the national survey to consult supply managers and business leaders.
The overall index ranges between 0 and 100. A figure greater than 50 indicates an expanding economy over the next three to six months.
Here are the Missouri results of the April survey in the Mid-America region:
The state’s Business Conditions Index rose but remained below growth neutral at 49.7, compared with 47.8 in March. Index components were new orders at 48.7, production at 54.5, delivery lead time at 52.1, inventories at 51.2 and employment at 46.8. April’s weakness was recorded among durable-goods producers, especially transportation equipment and parts manufacturers, and computer and electronic component producers. “Based on our surveys over the past several months, I expect the jobless rate to expand by another 0.2 (percentage points) by the end of the summer,” Goss said.