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Associated Press, Published October 01 2012

Survey suggests little economic growth in Midwest

OMAHA, Neb. — Little or no economic growth is likely this year in most of the nine Midwest and Plains states covered by a survey of business leaders, but the booming oil business will continue to drive growth in North Dakota and Oklahoma, according to the report released Monday.

The region's overall economic index improved to a weak 50.4 in September from August's 49.7.

Any score above 50 suggests economic growth in the months ahead, while a score below 50 suggests a decline. North Dakota's state economic index hit 61.6 in September, and Oklahoma's registered 56.6 thanks to the oil boom.

Creighton University economist Ernie Goss, who oversees the survey, said concerns about U.S. fiscal policy, the elections, inflation and Europe's economic turmoil slowed the economy.

“Supply managers, much like the entire business sector, remain very pessimistic regarding future economic conditions,” Goss said.

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

The region's employment index remained negative, slipping to 46.1 in September from August's 49.5. Goss said that's the lowest jobs index since the recession ended in 2009.

“I expect the regional economy to lose both manufacturing and non-manufacturing jobs, albeit at a slow pace, in the final quarter of 2012,” Goss said.

Job gains in North Dakota, Oklahoma and Iowa will be offset by job losses in the other six states, he predicted. While strength in the energy industry is fueling growth in North Dakota and Oklahoma, Iowa is growing mostly because of strong manufacturing performance.

The prices-paid index increased to 66 in September from August's 65.2, suggesting inflation ahead.

“The combination of drought conditions and the Federal Reserve's easy or cheap money policies are driving the wholesale level higher,” Goss said.

The confidence index, which measures how optimistic business leaders are about the next six months, registered 44.7 in September. That was slightly better than August's 44.3.

The inventory index grew to 49.2 in September from August's 47.3. That suggests that the decline of inventory levels in the region is slowing.

The export order index increased to 48.7 in September from August's 48.3. The import index declined to 48.9 from August's 51.4.

“Given the importance of exports to past regional growth, the downturn in new export orders is another factor that will contribute to a final quarter that is lackluster,” Goss said.

Other components of the September index were:

• New orders at 48.7, up from August's 46.1.

• Production or sales up to 51.7 in September from 49.5.

• And delivery lead time at 56.4, up from August's 56.2.

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

Arkansas: The state's overall index slipped to 49.6 from August's 51.2. Components of the index were new orders at 43.5, production or sales at 49.6, delivery lead time at 50.3, inventories at 50.5, and employment at 54. “Job growth in the state has slipped over the past several months. Our recent surveys indicate that the Arkansas’ job growth will continue to decline for the final quarter of the year with no new net job gains,” Goss said. “Job gains for durable goods producers will be offset by losses for nondurable goods manufacturers. The 2012 drought will continue to restrain retail sales in the state.”

Iowa: The overall index declined to 56.5 from 57.1 in August, but it has remained above growth neutral for 33-straight months. Components of the index were new orders at 59.6, production or sales at 55.4, delivery lead time at 58.8, employment at 53.2, and inventories at 55.5. “Both durable and nondurable goods manufacturers continue to report expanding economic conditions with job gains. The 2012 drought has yet to put a dent in business activity for agriculture equipment manufacturers in the state, but has negatively influenced retail sales,” Goss said.

Kansas: The state's overall index sank 47.3 from August's 48. Components of the index were new orders at 45.5, production or sales at 53.1, delivery lead time at 46.8, employment at 45.3, and inventories at 46. “Surveys over the last several months point to no job gains for Kansas for the final quarter of 2012. The 2012 drought will continue to weigh on businesses linked to agriculture in the state. Pullbacks in exports will negatively impact the state's economy in the fourth quarter of 2012,” Goss said.

Minnesota: For a third straight month, the Minnesota index remained in negative territory. The index decreased to 47.2 from 49.7 in August. This is the first time since the recession that the overall index has been below 50 for three straight months. Components of the index were new orders at 36.8, production or sales at 42.9, delivery lead time at 60.4, inventories at 50.3, and employment at 45.8. “Very strong job growth for the first half of 2012 will be replaced by zero to slightly negative employment gains for the final quarter of 2012. Job gains for durable goods producers will be more than offset by job losses for nondurable goods manufacturers, including food processors,” Goss said.

Missouri: The September index slipped to 51 from August's 53.9. Components of the index were new orders at 49.9, production or sales at 52, delivery lead time at 54.4, inventories at 45.4, and employment at 53.1. “Durable goods producers in Missouri continue to report very healthy growth. However, nondurable goods manufacturers are experiencing pullbacks in economic activity. Additionally, businesses linked to agriculture continue to be negatively influenced by the 2012 drought. Job additions for the final quarter of 2012 will be less than one-fourth of that experienced in the first quarter of 2012,” Goss said.

Nebraska: After two months in negative territory, Nebraska's overall index improved to a weak 50.3 in September from August's 47.8. Components of the index were new orders at 46.3, production or sales at 49.9, delivery lead time at 55.8, inventories at 52, and employment at 47.7. “Job growth will be flat for the final quarter of 2012 for Nebraska. Gains for durable goods producers will be offset by losses for nondurable goods manufacturers, including food processors,” Goss said.

North Dakota: North Dakota led the region in September with an overall index of 61.6, up from August's 57.4. Components of the overall index were new orders at 70.9, production or sales at 74.7, delivery lead time at 64.2, employment at 52.3, and inventories at 45.9. “All sectors of the North Dakota economy continue to expand at a solid pace. However, industries and firms with close ties to energy are growing at a very healthy pace with labor shortages reported in some areas of the state,” Goss said.

Oklahoma: The overall index improved to 56.6 in September from August's 53.6. Components of the index were new orders at 54.8, production or sales at 49.5, delivery lead time at 78.1, inventories at 42, and employment at 58.4. “Durable goods producers in Oklahoma, such as metal product manufacturers, are expanding at a very healthy pace. This expansion is more than offsetting losses for nondurable goods manufacturers such as food processors. Surveys over the past several months point to solid gains and a reduction in the state's unemployment rate by 0.3 percentage points in by the end of the year,” Goss said.

South Dakota: For a third straight month, South Dakota's index remained below growth neutral at 46.6, down from August's 47.2. Components of the index were new orders at 42.9, production or sales at 50.7, delivery lead time at 49.9, inventories at 45.4, and employment at 44.1. “Manufacturing growth has stymied over the past several months. Companies in South Dakota continue to expand sales and output via increases in the hours worked of current employees rather than adding new workers. Job growth will be flat for the final quarter of 2012,” Goss said.