Jump in survey index numbers suggests Midwest economic recovery picking up steam

Survey shows jump in Midwest economic recovery

OMAHA, Neb. — Business leaders in nine Midwest and Plains states are starting to believe that the region’s economy is picking up steam, according to results of a January survey released Monday.

The Business Conditions Index for the Mid-America region made a healthy jump in January, to 54.7, up from December’s 50.3 and November’s 47.5.

The index ranges from zero to 100, and any score above 50 suggests 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.

While surveys over the past several months point to a still-fragile economic recovery, the January survey results are encouraging, said Creighton University economist Ernie Goss, who oversees the survey.

“The likelihood of dipping back into recessionary territory has diminished significantly,” Goss said.

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

The regional employment index for January was 51.7, up from December’s 47.6. Thirteen percent of supply managers reported job losses, while 17 percent indicated their firms were hiring. Meanwhile, the percentage of supply managers expecting layoffs in 2010 declined significantly over the past two months, from 41 percent in November to 24 percent in January. Also, the number expecting a pay increases in 2010 rose from 48 percent in November to 53 percent in January.

“While I would not call this a surge, it clearly reflects an improving job market,” Goss said.

Looking ahead six months, the January confidence index dipped to 68.5 from December’s 69.5.

“Record low interest rates, improving housing markets and stabilizing unemployment rates are keeping the economic optimism high among supply managers in the Mid-America region,” Goss said.

The prices-paid index, which tracks the cost of raw materials and supplies, soared to 75.5 from December’s 65.2.

Goss said the prices-paid index has more than doubled over the past year, seeming to contradict the Federal Reserve’s predictions of subdued inflation trends.

“I expect inflation at the consumer level to top 3.3 percent as early as the middle of 2010. This is a full percentage point above the Fed’s acceptable level,” Goss said.

The survey’s trade numbers showed improvement. New export orders advanced to 55.8 from 51.9 in December, while imports rose to 50 from December’s 48.5.

“Exports will be an important component of any significant 2010 economic rebound,” Goss said.

Other components of January’s overall index:

— New orders increased 57.4, up from 55.5 in December.

— Production or sales increased to 57.9, up from December’s 54.4.

— And delivery lead time jumped to 58.4, up from 54.7 in December.

On the Net:

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