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Sunday, July 06, 2008
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News Detail
Ag income bolsters economy
5/4/2008 3:24:46 PM
By Joe Ruff
WORLD-HERALD STAFF WRITER
Record farm income and fewer problems than the rest of the country with a slumping housing market helped the Midwest economy improve in March, an economics professor said while releasing a monthly survey of the manufacturing industry.
Inflationary pressures soared, however.
The Mid-America Business Conditions Index advanced to 54.3 from February's 49.5 and January's weak 50.6, Creighton University economics professor Ernie Goss said Tuesday.
The index ranges from 0 to 100. Numbers greater than 50 indicate an expanding economy and numbers less than 50 indicate a contracting economy.
The prices paid index, which tracks the cost of raw materials and supplies and helps gauge inflationary pressures, advanced to 90.3 from February's 88.8 and hit its highest level since the survey began in 1994, Goss said.
High grain and other commodity prices have been bolstering the Midwest economy, as has the ethanol industry, Goss said.
Goss said the Midwest region's employment index advanced to a tepid but improving 52.4 in March from February's weak 48.9 and January's 46.8.
"Given the unexpected upturn in the regional job market, the real danger now is excessive inflationary pressures,'' Goss said.
Goss surveys manufacturing supply managers and business leaders in Nebraska, Iowa, Kansas, Missouri, Minnesota, North Dakota, South Dakota, Oklahoma and Arkansas.
In a similar national survey, the Institute for Supply Management said its manufacturing index registered 48.6 last month, contracting at a slower rate than February's 48.3.
The Federal Reserve committee that sets interest rates meets again April 29 and 30. Whether the committee cuts rates will depend on the national job outlook, Goss said.
"The likelihood of a rate cut at that meeting has been significantly reduced in my judgment,'' Goss said.
Sales abroad were an important source of March growth in the Midwest, Goss said. A cheap dollar made U.S. goods less expensive abroad and pushed new export orders to a healthy 57.5 from February's 56.3, Goss said.
The weak dollar has increased the price of imported goods such as oil but it has failed to restrain imports, which surged to 57.9 from February's 52.1, Goss said.
Looking ahead six months, economic optimism captured by the confidence index rose slightly to a very weak 38.0 in
March from February's 37.8, Goss said.
"Despite an improving regional economy, supply managers' outlook has been undermined by the national downturn in housing, elevated inflationary pressures, and the subprime mortgage crisis,'' Goss said.
Other components of the overall business conditions index for March included new orders going up to 55.8 from February's 44.6; production at 57.7, up from 51.1; inventories at 56.3, up from 53.2; and delivery lead time at 46.7, down from 54.7.
In Nebraska, the overall index was below growth-neutral for a fifth straight month, at 46.9 from February's 46.6. The state has nearly 12 percent of the nation's ethanol plants and more than 11 percent of U.S. corn production, helping its economy.
But the state's technology sector and transportation-equipment-manufacturing industry reported pullbacks in economic activity, Goss said.
In Iowa, the overall index expanded for a third straight month to its highest level since July 2007, at 60.0 from February's 54.7, Goss said.
Iowa has more than 20 percent of the nation's ethanol plants and 19 percent of U.S. corn production. In addition, its computer and electronic-component-manufacturing industry continued to expand at a solid pace, Goss said.
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