Icon (Close Menu)

Logout

Survey Suggests Economic Slump Looming in Midwest

5 min read

Another economic slump may be developing in the Midwest and Plains states, according to a survey of business leaders released Thursday.

The Mid-America Business Conditions index is based on monthly surveys of business leaders and supply managers in nine states. It includes a collection of indexes ranging from zero to 100. Survey organizers say any score above 50 suggests growth while a score below 50 suggests decline for that factor.

The overall index dropped to 46.5 last month from 50.4 in September, the report said. It was 57.2 in June but fell below 50 in the following months.

“Surveys over the past several months point to slightly negative growth for the next three to six months,” said Creighton University economist Ernie Goss, who oversees the survey. “However, as in (the) past months, two states with significant dependence on energy, North Dakota and Oklahoma, will continue to expand at a positive pace while the rest of the region pulls back.

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

While business leaders’ responses indicated an economic slump was ahead, they expressed more confidence in October than the month before. Last month’s business confidence index jumped to 58.0 from September’s very weak 44.7.

“Despite less favorable business conditions for their own firms, supply managers are more positive about the overall economy in the months ahead,” Goss said. He said drops in the national unemployment rate and upturns in the U.S. housing market were boosting the economic outlook of those who responded to the survey.

In the October survey, the supply managers were asked to gauge the likelihood of a 2013 recession.

The survey report said that 23.4 percent who responded said they thought a recession was likely or very likely next year. But 22.7 percent said they thought a 2013 recession was unlikely. The remainder viewed the chances of a recession at 50-50.

On the jobs front, the region index rose to a weak 47.7 from September’s 46.1. The index was 49.5 in August.

The manufacturing sector has been shedding jobs over the past several months, Goss said, and U.S. Bureau of Labor Statistics data for September indicate that the region lost jobs in other areas as well in September.

When the federal data for October are released later in November, Goss said, he expects the numbers will show the region is still losing jobs but at a slow pace.

“Job gains in North Dakota and Oklahoma will be more than offset by declines in the rest of the region,” Goss said.

State By State

Here are the state-by-state results of the October survey in the Mid-America region:

Arkansas: The October overall index plummeted to 42.3 from September’s 49.6. Components of the index were new orders at 34.3, production or sales at 37.3, delivery lead time at 50.1, inventories at 50.2 and employment at 39.5. According to U.S. Bureau of Labor Statistics, even though the state’s unemployment rate declined in September, Arkansas lost jobs on a seasonally adjusted basis, Goss said. Discouraged job seekers left the workforce in September as well. “Our results indicate that this trend continued in October and is likely to persist for the next three to six months,” he said.

Iowa: Iowa’s overall index dropped to 54.2 from 56.5 in September. Components of the overall index for October were new orders at 57.1, production or sales at 50.4, delivery lead time at 53.9, employment at 53.2 and inventories at 52.8. “While our survey of Iowa businesses over the past several months have been positive and pointing to reduced unemployment and job gains, they have not been nearly as robust as (federal) data indicate,” Goss said. He expects the federal numbers to be revised upward in the months ahead.

Kansas: The overall index rose to a still weak 47.9 from September’s 47.3. Components of the index were new orders at 42.7, production or sales at 46.6, delivery lead time at 48.4, employment at 63.8 and inventories at 38.0. The U.S. Bureau of Labor Statistics said the state’s unemployment rate plunged in September, Goss said, but “our surveys of Kansas businesses over the past several months have been much less positive and not nearly as robust as BLS data indicate.” He expects higher Kansas unemployment data in the months ahead as the state’s economic growth cools.

Minnesota: For a fourth straight month, the overall Minnesota index remained below growth neutral. The index dipped to 47.1 in October from 47.2 in September. Components of the index were new orders at 36.3, production or sales at 39.3, delivery lead time at 61.9, inventories at 50.1 and employment at 47.9. “U.S. Bureau of Labor Statistics data show that the state lost manufacturing jobs in September even as the unemployment rate declined,” Goss said. “Our surveys indicate that Minnesota continued to lose manufacturing jobs in October. I expect these jobs losses to persist, though at a slight pace, in the months ahead.”

Missouri: The overall Missouri index slipped to 50.0 from 51.0 in September. Components of the overall index were new orders at 48.4, production or sales at 51.0, delivery lead time at 55.9, inventories at 41.7 and employment at 52.9. “Missouri is one of four states in the region that did not experience an overall index reading below growth neutral for the month,” Goss said. Strong growth in durable-goods manufacturing has more than offset weakness among nondurable-goods producers. Nonetheless, job growth for the next three to six months will be weaker than for the same period a year ago, he said.

Nebraska: For the third time in the past four months, Nebraska’s overall index computed to below growth neutral. Number dropped to 45.5 from September’s 50.3. Components of the index for October were new orders at 39.8, production or sales at 41.1, delivery lead time at 52.9, inventories at 49.5 and employment at 44.0. Stronger growth among durable-goods producers prevented the overall index from sinking lower. Nondurable-goods producers, including food processors, “are experiencing pullbacks in economic activity,” Goss said. Job growth will be slightly negative in the next three to six months, according to recent survey results, he said.

North Dakota: The overall index hit a regional high of 64.1 in October, compared with 61.6 in September. Components of North Dakota’s overall index were new orders at 68.8, production or sales at 70.7, delivery lead time at 57.1, employment at 67.8 and inventories at 56.3. “Each month, employment in North Dakota rises to record levels for the state,” Goss said.

Oklahoma: The overall Oklahoma index soared to 63.3 from 56.6 in September. Components of the index were new orders at 77.4, production or sales at 74.8, delivery lead time at 39.3, inventories at 71.0 and employment at 54.2. “Even as Oklahoma’s economy has expanded at a solid pace, we are tracking somewhat weaker, but positive, job growth,” Goss said. Companies in the state report shortages of skilled labor even as some firms cut jobs.

South Dakota: For a fourth straight month, the overall index for South Dakota came in below growth neutral. The index slipped to 45.3 from 46.6 in September. Components of the overall index for October were new orders at 51.4, production or sales at 55.3, delivery lead time at 50.0, inventories at 27.7 and employment at 42.0. The state has had virtually no job growth this year, Goss said. And, he said, “Our surveys point to slightly negative employment growth for the next three to six months.”

(Copyright 2012 The Associated Press. All rights reserved. This material may not be published, rewritten, broadcast or distributed.)

Send this to a friend