Exports boost Midwest economy

But Kansas indicator falls for fifth consecutive month

A look at conditions in Kansas

The Kansas Business Conditions index dropped in December for the fifth month in a row. It hit 44.2, down 5.2 percentage points from 49.4 in November. The index was 53.4 in October. The overall index ranges between 0 and 100. A figure greater than 50 indicates an expanding economy over the next three to six months.

Components of the state’s overall index: new orders, 41.7; production, 45.8; delivery lead time, 54.2; employment, 45.8; and inventories, 29.2.

“Based on our survey, I expect the state’s jobless rate to increase during the first quarter of 2008 before it stabilizes by midyear,” said Ernie Goss, director of Creighton University’s Economic Forecasting Group. “Losses connected to industries to ties with telecommunications and residential housing will more than offset growth associated with the state’s transportation equipment manufacturers.”

The state’s best sector in 2007 was aircraft and aviation equipment manufacturing. The worst was telecommunications.

Omaha, Neb. ? A surge in export orders has given a leading economic indicator for a nine-state region its biggest push since February 2002, a Creighton University economics professor says.

In a report released Wednesday, the Mid-American Business Conditions Index soared to 55.0 from November’s weak 49.2 and October’s 50.1. The index ranges between 0 and 100, and an index greater than 50 indicates an expanding economy over the next three to six months.

Ernie Goss, director of Creighton’s Economic Forecasting Group, said the downturn in housing and related credit issues continues to be a drag on growth for many industries. But he said strong farm income and upturns associated with alternative energy production more than offset that weakness.

“While this is very good news, I remain concerned that the region could still dip into recession territory in early 2008,” Goss said. “Economic reports over the next several months will obviously be very important.”

Goss compiles survey information from supply managers and business leaders in the nine-state Mid-America region. The states are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.

There are elevated inflationary pressures caused by a rise in oil prices, Goss said. The prices-paid index, which tracks the cost of raw materials and supplies, expanded to 78.4 from November’s elevated 78.0, almost matching the 2007 high of 81.7 in April.

Trade numbers improved significantly for December. New export orders rocketed to 65.4 from November’s 50.7 and October’s 50.0. Imports were up at 57.0 from November’s 56.8.

The weakened dollar, which has made U.S. goods cheaper abroad, has begun to have marked effects on new exports orders, Goss said.

“Even with the cheaper dollar, imports from Asia, along with high oil prices, have kept imports significantly above growth neutral,” Goss said.

The employment index advanced to 54.1 from November’s 47.3 and October’s 49.5. Goss said this is the first time since September that firms he tracks have added jobs.

“However,” he said, “a large upturn for one month does not convince me that the job market has turned the corner.”

Looking ahead six months, supply managers’ economic optimism, captured by the confidence index, rose to a still weak 45.9 from 41.7 in November.

Other components of the month’s Business Conditions Index were: new orders at 56.9, up from 49.4 in November; production at 56.8, up from 50.6; inventories at 53.4, up from 50.0; and delivery lead time at 50.7, down from 54.8.

The Creighton Economic Forecasting Group has conducted the monthly survey since 1994.

The Institute for Supply Management, formerly the Purchasing Management Association, began to formally survey its membership in 1931 to gauge business conditions. The Creighton Economic Forecasting Group uses the same methodology as the national survey.