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Associated Press, Published February 01 2012

Report: Midwest economic index jumped in January

OMAHA, Neb. — The economy in nine Midwest and Plains states rebounded from a weak December and is poised to continue growing in the months ahead, according to a monthly survey of business leaders released Wednesday.

Creighton University economist Ernie Goss said December's dip appears to have been related to seasonal patterns and one-time issues like the flooding in Thailand — not ongoing concerns about Europe's debt problems.

The region's overall index rose to 55.9 in January, compared with 50 in December. The survey uses a collection of indexes ranging from zero to 100 — any score above 50 suggests growth while a score below 50 suggests decline for that factor, Goss said.

The survey of business leaders and supply managers covers Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.

“For much of the region, very healthy farm income has been an important driver of overall economic growth,” said Goss, who oversees the survey.

Businesses leaders who responded to the survey said they're concerned about rising energy costs and the effects of any new regulations. Goss said those are some of the risk factors that could derail the economic expansion.

The region's employment index rose above neutral for the first time since July, reaching 54.5 in January. That's up from December's 49.5.

“January's reading is clearly good news on the employment front. However, I will have to see several months of similar readings to be assured that the labor market is back on a solid growth path,” Goss said. Employment in the region remains about 360,000 jobs behind pre-recession levels, he said.

The confidence index jumped to 67.2 in January from December's 59.2, suggesting business leaders feel optimistic about the next six months. The prices-paid index, which tracks the cost of raw materials and supplies, increased to 67.8 in January from December's 62.4. Goss said price pressures are increasing as the economy improves.

The inventory index rose in January to 55.3 from December's 46.7. The increase suggests production will increase in the months ahead, Goss said.

The export index grew from 56.3 in December to 60.4 in January, and the import index jumped from 48 to 56.7.

Other components of the January index were:

Midwest economy: State-by-state glance for January

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. Creighton University economics professor Ernie Goss oversees the report.

The overall index ranges between 0 and 100. Growth neutral is 50, and a figure greater than 50 indicates an expanding economy over the next three to six months.

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

Arkansas: The overall index Arkansas jumped to 56.0 from December's 52.0. Components of the index were new orders at 57.0, production or sales at 59.2, delivery lead time at 52.6, inventories at 52.6 and employment at 51.4. Goss said Arkansas manufacturers are adding jobs very slowly. They continue to expand production by increasing the hours worked by current employees. He says Arkansas needs a 2.7 percent job gain to return to pre-recession levels.

Iowa: For the 25th month in a row, Iowa's overall index remained above growth neutral, soaring to a regional high of 66.0 in January from 56.3 in December. Components of the index were new orders at 77.1, production or sales at 65.8, delivery lead time at 64.0, employment at 67.2 and inventories at 64.0. “Iowa manufacturers are expanding at the strongest pace in the region,” Goss said. Iowa needs to add 43,000 jobs, or 2.9 percent, to return to pre-recession levels.

Kansas: The Kansas overall index was unchanged from December's reading of 50.1. Components of the index were new orders at 50.5, production or sales at 55.6, delivery lead time at 48.2, employment at 41.4 and inventories at 54.7. “Recent action by the Fed, which will weaken the dollar, will be favorable for the Kansas economy,” Goss said. The state needs to add 53,000 jobs, or 4 percent, to return to pre-recession levels.

Minnesota: The January overall index for Minnesota remained above growth neutral for the 30th straight month. It rose to 57.5, compared with 56.9 in December. Components of the index were new orders at 61.0, production or sales at 60.6, delivery lead time at 58.1, inventories at 57.8 and employment at 50.0. “As a result of flooding in Thailand, computer and electronic component producers in the state experienced recent pullbacks in production. Otherwise, durable- and nondurable-goods manufacturers are reporting solid improvements in business activity,” Goss said. Surveys over the past several months point to Minnesota growth for the first half of 2012. He said Minnesota needs to add 105,000 jobs, or 3.9 percent, to return to pre-recession levels.

Missouri: The overall index for Missouri rose 2 percentage points in January: to 51.0 from 49.0 in December. Components of the index were new orders at 50.3, production or sales at 50.8, delivery lead time at 55.0, inventories at 49.6 and employment at 49.4. “Among the nine Mid-America states, Missouri has lost more jobs to the recession and subsequent economic weakness than any other state,” Goss said. “While Missouri's manufacturing sector is recording solid improvements, other industries, such as telecommunications, continue to experience pullbacks in business activity,” he said. The state needs to gain about 161,000 jobs, or 6.1 percent, to return to pre-recession levels.

Nebraska: The overall index remained above growth neutral for the 15th consecutive month. The index inched up to 51.9 from December's 51.4. Components of the index were new orders at 52.1, production or sales at 48.8, delivery lead time at 52.8, inventories at 51.5 and employment at 54.1. “Based on recent survey results, I expect Nebraska's level of employment to return to pre-recession levels in the first half of 2012,” Goss said. The state needs to add 7,000 jobs, or 0.7 percent, to return to pre-recession levels.

North Dakota: North Dakota's overall index jumped to 60.3 in January, compared with 55.6 in December. Components of the index were new orders at 65.6, production or sales at 68.9, delivery lead time at 52.8, employment at 60.0 and inventories at 54.1. “Labor shortages related to the lack of housing in some parts of North Dakota continue to restrain growth in the state. Even so, manufacturers and nonmanufacturers in the state, especially those with links to agriculture and energy, report healthy business activity,” Goss said. North Dakota employment levels are at a record high.

Oklahoma: The state's overall index soared to 58.3 in January from 52.1 in December. Components of the index were new orders at 52.6, production or sales at 54.1, delivery lead time at 77.4, inventories at 55.7 and employment at 53.0. “Based on recent survey results, I expect Oklahoma's level of employment to return to pre-recession levels in the first half of 2012. Durable-goods manufacturing continues to be stronger than nondurable-goods producers in the state,” Goss said. The state needs to gain 5,000 jobs, or 0.3 percent, to return to pre-recession levels.

South Dakota: South Dakota's overall index climbed to 52.8 from 47.7 in December. Components of the index for January were new orders at 53.6, production or sales at 55.6, delivery lead time at 47.3, inventories at 49.0 and employment at 58.7. “Despite somewhat slower growth for the first half of 2012, South Dakota will continue to add jobs. Manufacturers, especially those linked to agriculture and international trade, will continue to expand business activity for the first half of 2012,” Goss said. Current South Dakota employment exceeds the state's pre-recession levels.

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Online:

Creighton Economic Forecasting Group: http: //www.outlook-economic.com