Associated Press, Published December 03 2012
Economy remains weak in Midwest — even ND dropsOMAHA, Neb. — The economy in nine Midwest and Plains states likely will remain sluggish because of weakness in ethanol and food production, but conditions vary widely across the region, according to a report released Monday.
The overall economic index for the region remained in negative territory at 48 in November based on the monthly Mid-America survey of business leaders. The index was slightly better than October's 46.5, but any score below 50 suggests the economy will contract over the next three to six months.
Creighton University economist Ernie Goss said weakness in nondurable-goods producers, such as food and ethanol makers, combined with worries about the health of the global economy to slow business in the region.
The survey covers Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota. Goss said that in November businesses in Iowa, North Dakota and Oklahoma outperformed the rest of the region.
The survey of business leaders and supply managers that Goss oversees uses a collection of indexes ranging from zero to 100. Survey organizers say any score above 50 suggests growth in that factor while a score below 50 suggests decline for that factor.
The business leaders surveyed turned pessimistic about the economy in November. The confidence index plummeted into negative territory at 43.5 in November from October's 58.
"Both the fiscal cliff and the uncertainty surrounding health care reform were reported by supply managers as negatively affecting their economic outlook," Goss said.
The region's employment index inched into positive territory at 50.5 in November, up from October's 47.7. Goss said durable goods manufacturers are hiring at a slow pace but that employment growth is being offset by job losses at nondurable-goods producers.
The prices-paid index, which tracks the cost of raw materials and supplies, improved to 64.4 in November from October's 71.5. But the index still suggests costs are increasing.
The inventory index remained in negative territory at 44.9 in November although it was slightly better than October's 43.5.
"Supply managers have now cut inventories for five straight months. The last time this happened was in 2009 when supply managers were reducing inventories in anticipation of weaker business activity," Goss said.
The export index fell to 47.9 in November from October's strong 60.8 reading. The import index also declined to 42.6 in November from 44.2 in October.
The other components of November's overall index were:
• New orders grew to 46 from October's 43.3.
• Production or sales improved to 46.6 in November, from October's 43.9.
• And delivery lead time declined to 51.8 from October's 54.1.
Here are the state-by-state results of the November survey in the Mid-America region:
Arkansas: The November overall index rose to a weak 45.4 from 42.3 in October. Components of the index were new orders at 39.6, production or sales at 41.9, delivery lead time at 50.1, inventories at 50.1 and employment at 45.0. Arkansas has lost manufacturing jobs in 2012. However, said Goss, the losses in the state's nondurable-goods sector were almost equal to the gain for the state's durable-goods producers. “Our November survey indicates that pullbacks among nondurables continue to outweigh advances for durable-goods manufacturers,” he said.
Iowa: Iowa's overall index dropped for the fifth month in a row, down to 52.6 from October's 54.2. The overall index has remained above growth neutral for the past 35 months, however. Components of the index for November were new orders at 53.5, production or sales at 45.2, delivery lead time at 55.8, employment at 56.9 and inventories at 51.4. “For 2012, Iowa has bucked the trend in the region by adding both durable- and nondurable-goods manufacturing jobs. Our recent surveys continue to point to growth for both manufacturing and nonmanufacturing in the state, but at a slower pace,” Goss said.
Kansas: The state's overall November index rose to 51.3 from 47.9 in October. Components of the index were new orders at 57.8, production or sales at 49.3, delivery lead time at 53.8, employment at 51.9 and inventories at 43.6. For 2012, Kansas has slowly added manufacturing jobs. Gains were greater for durable-goods producers, Goss said, because declines for food processors pulled the nondurable-goods sector numbers lower. Higher agriculture commodity prices will likely continue to weigh on food processors as the state economy slowly expands, he said.
Minnesota: The overall index for Minnesota came in below growth neutral for the fifth straight month, but it rose to 48.4 from 47.1 in October. This is the first time since the recession that the state's overall index has been below 50 for five straight months. Components of the index from the November survey were new orders at 36.9, production or sales at 40.5, delivery lead time at 63.6, inventories at 48.2 and employment at 52.8. “Over the last several months we have been recording losses, albeit small, across the manufacturing sector,” Goss said. “Businesses linked to construction are reporting improving economic conditions. Our surveys point to slightly negative economic and job growth for the state over the next three to six months,” he said.
Missouri: The state's overall index slipped to 47.2 from 50.0 in October. Components of the survey were new orders at 41.6, production or sales at 45.8, delivery lead time at 55.5, inventories at 41.9 and employment at 51.5. “For 2012, job losses in Missouri's nondurable-goods sector more than offset increases for durable-goods producers in the state. Our recent surveys of supply managers in the state show a continuation of this trend with overall job growth likely to hover slightly below zero in the next three to six months,” said Goss.
Nebraska: Nebraska's overall index remained below growth neutral for the fourth time in the past five months, but it rose to 47.3 in November from 45.5 in October. Components of the index were new orders at 47.6, production or sales at 45.5, delivery lead time at 49.2, inventories at 49.0 and employment at 45.3. “Improving economic conditions in Nebraska's construction industry are pushing growth higher for firms with linkages to this industry,” Goss said. However, manufacturing's weakness more than offset nonmanufacturing growth. Surveys over the past several months point to slightly negative job and economic growth for Nebraska over the next three to six months, he said.
North Dakota: The state's overall index once again was the regional high but slid to 58.1 from October's 64.1. Components of the overall index for November were new orders at 59.4, production or sales at 72.8, delivery lead time at 53.5, employment at 51.4 and inventories at 53.1. “Our surveys over the past several months point to positive but somewhat slower growth for the state over the next three to six months. Housing and labor shortages are reported by supply managers as restraining more robust growth,” Goss said.
Oklahoma: Oklahoma's overall index sank to 56.1 from October's 63.3. Components of the November survey were new orders at 63.6, production or sales at 62.4, delivery lead time at 42.0, inventories at 60.5 and employment at 52.1. “Growth stemming from a very strong energy sector continues to push state economic growth higher,” Goss said. Manufacturing continued to expand at a solid pace. “Our surveys over the past several months project healthy but somewhat slower growth for the next three to six months,” Goss said.
South Dakota: For a fifth straight month, South Dakota's overall index remained below growth neutral. However, it rose to 48.9 from 45.3 in October. Components of the index for November were new orders at 60.7, production or sales at 53.8, delivery lead time at 55.0, inventories at 28.8 and employment at 46.0. “For 2012, South Dakota added manufacturing jobs at a very slow but positive pace. Our surveys over the past several months indicate that the growth rate in both manufacturing and nonmanufacturing will move to slightly negative for the next three to six months,” said Goss.
Creighton University economic reports: http://www.outlook-economic.com