Midwest business conditions improving, Creighton survey finds

Business services, durable goods showing strongest growth

George Ford
Published: February 3 2014 | 11:19 am - Updated: 29 March 2014 | 3:05 am in

The economy in a nine-state region that includes Iowa improved in January from the previous month, according to the MidAmerica Business Conditions Index released Monday by Creighton University.

The index, which ranges between 0 and 100, rose to a solid 57.7 last month from 53.2 in December. Readings higher than 50.1 indicate an expanding economy while those below 50 show a contacting economy.

“As in December, very strong growth for firms in the business services industry and durable goods manufacturing more than offset pullbacks for the region’s non-durable goods manufacturing sector,” said Ernie Goss, director of Creighton University’s Economic Forecasting Group.

After declining below growth neutral in December, the employment gauge rose to a solid 56.4 from 48.7 in January. “The region has now gained back all job losses during the recession," Goss said. "Contrary to the rest of the nation, the size of the labor force in the region is at its highest level ever."

After declining for three straight months, the prices-paid index, which tracks the cost of purchased raw materials and supplies, increased to to 71.6 in January from 63.6 in December.

"After remaining tepid for most of the last year, inflationary pressures at the wholesale level are once again expanding at a faster pace," Goss said. "Supply managers indicated that on average they expect prices for the products and services that they purchase to rise by a modest 3 percent in 2014.

"While the Federal Reserve has announced it intends to scale back its bond buying program by another $10 billion in February, I expect the Fed to begin scaling this program more aggressively in the months ahead as inflationary pressures at the wholesale level rise at a somewhat faster pace.”

The inventory index, which tracks the level of raw materials and supplies, expanded to 53.2 from December’s 51.3.

“This is yet another signal that supply managers are more upbeat about the economy as they increased inventories in anticipation of expanding sales for their companies in the months ahead,” Goss said.

Iowa’s Business Conditions Index fell to 59.1 in January from December’s 61.5. Components of the index from the monthly survey of supply managers were new orders at 60.8, production or sales at 66.5, delivery lead time at 51.6, employment at 59.4, and inventories at 57.1.

“Both durable and nondurable manufacturers along with business service firms reported healthy January business activity," Goss said. "Based on our survey results, Iowa’s economy will continue to expand for the next three to six months, but at a slower pace than recorded for the same period in 2013.”

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