Survey finds Midwest business conditions improving, ag sector soft

Durable goods producers end year at solid pace

George Ford
Published: January 3 2014 | 6:00 am - Updated: 29 March 2014 | 1:34 am in

A survey of Midwest corporate supply managers has found conditions improved in December in a nine-state region stretching from North Dakota to Arkansas.

The Mid-America Business Conditions Index, compiled by Ernie Goss, director of Creighton Universityís Economic Forecasting Group, rose to a tepid 53.2 from Novemberís 51.2. States included in the survey are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.

A reading above 50.1 indicates an expanding economy, while a reading of 49.9 or less reflects a contracting economy.

"Very strong growth for firms in the business services industry and durable goods manufacturing more than offset pullbacks for the regionís non-durable goods manufacturing sector," Goss said. "Businesses tied to agriculture continue to report softer economic conditions."

For the second time in the past three months, the regionís employment gauge fell below growth neutral. The index sank to 48.7 from Novemberís 51.2, but was up slightly from Octoberís weak 48.2.

"Job growth among transportation firms in the region, both rail and truck, remains very strong," Goss said. "On the other hand, non-durable goods producers tied to agriculture, except for food processors, continue to shed jobs, but at a slow pace."

Looking six months ahead, economic optimism -- as captured by the December business confidence index -- soared to a strong 66.5 from Novemberís 57.2.

"The resolution of the federal budget impasse and improvements in the nationís housing sector boosted supply managersí business outlook for the month," said Goss, Jack A. MacAllister Chair in regional economics in Creighton's Heider College of Business.

Iowaís Business Conditions Index rose to a regional high of 61.5 for December from Novemberís healthy 59.2. Components of the index were new orders at 66.1, production or sales at 66.3, delivery lead time at 53.2, employment at 63.2, and inventories at 58.7.

"Durable goods manufacturers ended the year growing at a solid pace," Goss said. "Even agriculture equipment manufacturers, by expanding sales abroad, are experiencing solid gains in business activity."

Goss said non-durable goods producers in Iowa, including food processors, grew their business in the second half of 2013.

"I expect these same sectors to push the overall Iowa economy into the positive growth range for the first half of 2014. However, that growth will be down from the same period in 2013," Goss said.

The December survey asked supply managers in the nine-state region to identify the biggest challenge to their company or industry in 2014.

More than one in five, or 20.6 percent, said higher costs and uncertainties surrounding implementation of the Affordable Care Act represented the top challenge for their business. Rising regulatory costs was tabbed as the top potential hurdle by 19.1 percent of those surveyed.

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