Economist: Higher Fuel Prices Slow Midwest Economy

OMAHA, Neb. (AP) — Soaring gasoline and other fuel prices have pushed an inflation indicator to its highest ever level in a monthly survey in nine Midwestern and Plains states, further slowing the regional economy.

The overall Mid-America business conditions index dropped to 57.7 in April from 61.4 in March. The index remained in positive territory above 50, mainly because higher agricultural commodity prices improved the outlook for firms linked to the farm sector, said Creighton University Economics Professor Ernie Goss, who oversees the survey.

But “we are beginning to see high energy prices cut into economic growth,” Goss said.

The survey of supply managers and executives uses a collection of indexes ranging from zero to 100. Organizers say 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 survey’s prices-paid index, which tracks the cost of raw materials and supplies, soared to 94, a record high, from March’s 88.

“Higher commodity prices, especially for energy products, pushed our inflation gauge to its highest level since we initiated the survey in 1994,” Goss said.

Even with the Federal Reserve’s indication that it will end its buying of long-term U.S. Treasury bonds this summer, Goss said he expects the Fed’s record-low short-term interest rates to continue to weaken the dollar and push inflation upward.

Survey participants were asked last month how their suppliers were dealing with higher energy prices. About 28 percent said their vendors had raised prices permanently, 14 percent reported temporary price increases and 48 percent said supplying firms had added transportation surcharges. The remaining 10 percent reported other supplier reactions, Goss said.

Signaling that inflation will only get worse in the region, about 39 percent of survey participants said they expect vendor prices to increase more than 6 percent over the next six months.

The April employment index dropped to 54 from March’s 60.3. Goss said 16 percent of firms in the region reported employment cuts, compared with 10.7 in March.

Rising gas and energy costs also appeared to shake business leaders’ confident in the economy. The April confidence index, which gauges economic confidence over the next six months, sank to 57.5 from 65.8 in March.

The inventory index declined to 53.7 from 60.9 in March, with Goss blaming business managers’ expectation of higher input prices and slumping sales in the months to come.

The export index stood at a healthy 57.1 compared to March’s 57.5, while the import index dipped to 56.1 from March’s 58.1.

“The cheap dollar and a global economic expansion combined to boost sales and new orders from abroad,” Goss said.

Other components of the April overall index were:

— New orders 59.5, down from March’s 65.7.
— Production or sales index at 59.5, down from 63 the previous month.
— Delivery lead time at 62.0, up from 57.2 in March.

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

  • Talbert

    It doesn’t take a rocket economist to figure this out. Nothing effects economic health like gas prices. It virtually effects everything and it amazes me that fuel and food prices are not used in the inflation index.

    • jim

      Saudi Arabia has 279 billion barrels of oil in reserve, and the sell us 1.8 million barrels a day, there is a list of top 15 oil countries in the world that sells us oil. There is enough oil to go around,who wants to get rich. How about all the working class people claim exempt on the W2’s and give no tax money for 60 day’sand then see how fast things start to happen. It is all there faults, don’t blame one party over the other. Same thing happened when Bush was in office.

    • Fred

      It amazes me that energy prices are so high and Obama is still president. He is responsible because he stopped drilling.

      • Jim

        The president did not stop drilling. This country drills for the same amount of oil now that we did under Bush. Look it up.

        • dan


          Does the word moratorium ring a bell? This is what has halted the production. It was lifted in October of 2010 but no permits have been issued as Ken Salazar is working the slow-walk process to the hilt. HR 1229 & 1230 will resolve the issues but again Republicans having to fight Tooth and Nail to get it thru to relieve the supply concerns and finally lower oil prices again.

          • Jim

            The moratorium is on new drilling. Any drilling that was going on previously is still going on, other than the BP rig that blew up and killed 13 people. As for lowering prices, most everyone agrees that new drilling now wouldn’t lower prices for many years, if ever. Additional oil drilled in the Gulf, for example, would not be ready for the market for many years and even then would be sold globally, having very little impact on our prices at the pump. People who seriously want to lower prices in the short term should not count on increased drilling.

            • dan

              If you worked in the oil industry you know the process is seek and find. When you stop the ability to continue seeking, you kill the prospect of future oil reserves being found. The forecast of not seeing the oil for years was brought up 3 years ago during the election. If it is 6 years total we would be half way there. I guarantee you we will be in the same boat 3 years from now.
              Short term prices decreases are for people who live in a fantasy world. We need long term oil production to keep our economy vibrant.

      • Phil

        You have been watching to much FOX News.and listening to Michele Bachmann babble.

  • zee the reporter

    gas prices need to be around 2 a gal~ to jump start the ailing American economy ! zee reporting!

  • Jim

    We must find a way to stop this madness and creed.

  • DLQ

    Suck it up everybody the government will keep you bent over that table as long as those blood suckers remain in office. They will not be happy until everybody who is even close to middle class is destitute leaving the banks to own everything. Just like in the old days when you rented the company housing and bought from the company store so they could take back everything you earned and worked for. Big corporations and big government wont even have the tact to use lube.

  • Justin

    If this was an election year, gas would be at $2.35 a gallon.

    • Jim

      You give the government and politicians WAY too much credit. They have very little control over gas prices in the short term. If you’re looking for proof, just check gas price averages during the weeks leading up to recent past elections.

  • Earthman 2020

    Higher fuel prices slow the midwest economy… and the northeast economy, the southeast economy, the northwest economy and the southwest economy… so basically the entire economy. We didn’t need a report to tell us this much. What a worthless story.

  • Babby Babble

    I’m about to graduate from 1st grade this summer.
    I predict that the amount of money my momma and daddy spend for this smelly gas will hurt our money. I listen to everyone else and they say the same stuff.

    Can I get paid to be an economist now too ?

  • Jim

    If our goverment wanted the gas prices to go down they would.

  • Little Green Pill

    An economic slowdown is to be expected. The Midwestern US is the most sedentary, car-reliant region on planet Earth.

  • Gilbert R.

    Its not the presidents fault there’s really nothing he can do, the sure way to lower gas prices is to lower our consumption, Other than china we’re the second leading consumer of oil, by doing so we limit our dependability on foreign oil. the economists’ as bad as they tell us, there’s enough money for people to continue to go to the highly publicized sporting events($100 o pop if not more) and pay prices on movies'( at least $10 per ticket if not more), we as Americans’ are spoiled we need be less wasteful, budget money better and take responsibility’ for our actions and stop taking mother nature gifts for granted, (If you’re watching the news she’s fighting back).


    It’s called supply and demand, you stupid idiots. If we want oil prices to drop over night we need to DRILL and DRILL and DRILL. All our muslim president would have to do is say that we are opening up Anwar. Prices would fall over night

  • Joseph Pearl

    Thanks for the article. I need resources like this for my practice as a consumer lawyer.

    Joseph Pearl
    Bakersfield Bankruptcy Attorney

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