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Midwest Survey Suggests Continued Economic Growth

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OMAHA, Neb. (AP) – The regional economy will continue to grow at a healthy pace in the first half of the new year, according to a survey of supply managers in nine Midwest and Plains states that was released Monday.

The Business Conditions Index for the Mid-America region rose to 57.5 in December from 55.9 in November and 52.3 in October.

December was the 13th consecutive month that the index came in above growth neutral.

“The regional economy ended the year on a high note as the weaker U.S. dollar and an expanding global economy stimulated business activity for firms with close ties to agriculture and energy commodities,” said Creighton University economics professor Ernie Goss, who oversees the survey.

The survey and report use a collection of indexes ranging from zero to 100. Organizers said any score above 50 suggests economic growth in the next three to six months, while a score below 50 suggests a contracting economy. States in the survey are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.

The overall index is a mathematical average of indices for new orders, production or sales, employment, inventories and delivery lead time, organizers said.

Looking ahead six months, the survey index on business confidence rose to 69.9 in December from 67.8 in November.

“While the overall U.S. economy remains weak, as gauged by unemployment rates, individual firms in the Mid-America region are experiencing solid improvements in business conditions,” Goss said. “This is translating into a strong economic outlook in terms of sales but without accompanying rapid job creation.”

The regional employment index remained above growth neutral last month, but it slumped to a 51.1 from November’s 53.0. For December, 21.1 percent of firms reported increases in hiring and 18.9 percent reported declines.

According to the survey data, only 24 percent of the companies surveyed expect to raise payroll numbers. Goss said the remaining 76 percent anticipate layoffs or level employment for the first half of the year.

“Despite this somewhat negative employment outlook, I expect the nine-state region to add almost 100,000 jobs for the first half of 2011, or a 1.2 percent annualized pace,” Goss said. “This pace is a half percentage point above what I expect for the national economy.”

The prices-paid index, which tracks the cost of raw materials and supplies, soared to 81.1 from 64.7 in November and 69.9 in October.

The rapid rise in the supply managers’ inflation gauge has yet to show up in consumer prices, Goss said, but he expects that to change.

The increase at the producer level will raise consumer prices well above the Federal Reserve’s target rate of 2 percent sometime in 2011, said Goss, who likewise expects long-term interest rates to rise rapidly in the first half of 2011 to compensate investors for rising inflation.

Other components of the December overall index:

– new orders at 58.2, up from November’s 54.5;
— production or sales at 55.8, down from 56.8;
— delivery lead time at 57.9, up from 55.6 in November.
— inventories at 64.4, compared with 59.7 last month;
— trade rose to 54,1 from 50.8 in November.

(© Copyright 2011 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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