Archive for Saturday, October 2, 2004

Manufacturing activity, inflation increase in Midwest

Economist’s survey finds high energy prices slowed job growth in September

October 2, 2004

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— Midwest manufacturing grew in September despite higher prices, according to a manufacturing index released Friday.

The Mid-America Business Conditions Index increased in September to 63.9 from August's 61.3. September's upturn was the index's first advance since a relative slowing that began in June, said Ernie Goss, an economist at Creighton University who conducts the survey.

The prices-paid index, however, rose to its second highest level in 10 years at 88.3, up from August's 88.1.

A similar, national index also showed growth, though at a more gradual pace than in August. The Institute for Supply Management said that its manufacturing index registered 58.5 in September, down from 59 in the previous month, and slightly higher than the 58.3 reading forecast by analysts.

Readings above 50 mean the manufacturing sector is expanding, while a figure below 50 represents a contraction. The national index has been above 50 since June 2003.

In the Midwest, light and nondurable goods manufacturing, which includes things like fertilizer and beverage production, was stronger for the first time in several months than services and durable goods, which includes agriculture equipment, aircraft and automobile production, Goss said.

"Higher energy prices and interest rates have cooled growth for durable goods manufacturers in the region," Goss said.

An employment index at 60 indicated job gains, but at a slower pace compared with last month's 61.3, Goss said.

The nine-state region, Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota, has added nearly 95,000 jobs for the first three quarters of 2004, Goss said.

However, high prices for energy and other commodities has slowed the job growth and will continue to produce a slower pace of job expansion for the fourth quarter, Goss said.

"As anticipated, this prolonged upward trend in inflationary pressures in the region is having an impact on confidence, which declined to 64.8, its lowest reading since the beginning of the Iraq war," Goss said.



For the fourth-consecutive month, Kansas supply managers and business leaders reported the strongest economic conditions in the nine-state region. The overall Mid-America Business Conditions Index faded slightly in September to 73.5 from August's 74.8.Survey participants reported intense inflationary pressures at the commodity level with a prices-paid index of 92.3 for the month. Creighton University economics professor Ernie Goss said the state's leading industry was transportation services and its lagging industry was wholesale trade.

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