Economic survey shows rural Midwest, Plains suffering from another dip into recession

Survey shows rural Midwest still in recession

OMAHA, Neb. — Rural areas in middle America are being hit particularly hard by what could be another dip into recession for the region, according to a survey of business leaders and supply managers in nine Midwest and Plains states released Tuesday.

November’s Business Conditions Index for the Mid-America region stood at 47.5, down from 51.8 in October and 56.2 in September. The index ranges from zero to 100, with any score above 50 suggesting economic growth in the next three to six months. Conversely, a score below 50 suggests a contracting economy over the next three to six months.

“The significant decline in farm income for 2009 continues to weigh on firms with strong ties to agriculture,” said Creighton University economist Ernie Goss, who oversees the monthly survey. “For example, agriculture-equipment manufacturers have been hard hit by farmers’ reluctance to purchase new equipment. This downturn has been particularly significant for rural areas of the region.”

The Mid-America survey covers Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.

The survey’s employment index also dipped in November, to 46.1. from October’s growth-neutral 50.

Goss said 41 percent of supply managers surveyed in November anticipate layoffs at their companies in the months ahead, and only 48 percent expect to receive pay increases in 2010.

“Over the past year, the region’s employment level is down by 400,000, or roughly 3 percent of its jobs,” Goss said. “Based on recent survey results, I expect the region to continue to lose jobs with unemployment rates rising slightly.”

Survey respondents remained optimistic about the next six months — although not as confident as they were in October. The confidence index dipped to a still strong 61.1 from 65.4 in October.

The prices-paid index, which tracks the cost of raw materials and supplies, stayed above 50 for a sixth straight month, coming in at 68 in November, down slightly from 68.9 in October.

The survey’s trade numbers remained weak. New export orders increased slightly to 50 from 49.3 in October, while imports dropped to 47.8 from 50.7 in October.

“The weaker U.S. dollar that is making imported goods more expensive is contributing to the decline in goods purchased from abroad and rising inflation pressures,” Goss said.

The November inventory index slipped to 43.6 from 44.4 in October — the 14th straight month it has been below 50.

Other components of November’s overall index:

— New orders decreased to 47.3 from 53.6 in October.

— Production or sales dropped to 46.7 from 53.5 in October.

— And delivery lead time fell to 53.9 from 57.9 in October.

On the Net:

Creighton Economic Forecasting Group: www.outlook-economic.com