Archive for Monday, August 1, 2011

Debt debate shakes Midwest economic confidence

August 1, 2011


— The contentious debate in Washington in recent weeks over raising the nation's debt ceiling shook the confidence of business leaders in nine Midwestern and Plains states, according to a monthly survey released Monday.

A section of the Business Conditions Index for the Mid-America region that gauges economic optimism over the next six months dropped below 50 for the first time since February 2009. The business confidence index dropped to 49.5 in July from June's 52.3.

"Elevated energy prices combined with uncertainty surrounding the U.S. debt situation remain important factors restraining business confidence," said Creighton University economist Ernie Goss, who oversees the survey.

The survey of supply managers and executives uses a collection of indexes ranging from zero to 100. Any score above 50 suggests growth while a score below 50 suggests decline for that factor.

States in the survey are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.

The overall index fell only slightly, to 54.1 in July from 54.9 in June. But it was the fourth time in the past five months that the index dropped.

Uncertainty about the national economy, high energy prices and a weak housing sector are among the factors hampering business expansion in the region, Goss said.

The survey's inflation gauge, which tracks the cost of raw materials and supplies, shows some easing in inflationary pressure, though prices remain high. The prices-paid index decreased to 70.9 in July from 74.3 in June, and was well below April's record 94.

Supply managers were asked how much they expected the prices they pay for products and services to increase over the next six months, with about 24 percent anticipating growth of more than 6 percent. Overall, an annualized rise of 6.8 percent was expected.

"This is down from 9.6 percent in May of this year when we asked the same question. Clearly, inflation expectations remain high, but are declining among supply managers," Goss said.

The index that measures inventory levels rose to July from June's 51, with Goss calling the jump "an important source of regional growth." The region's exports, which include grain and other agriculture commodities, declined in July as the dollar strengthened. The export index declined to 52.4 from June's 54.9.

The other components of the July index were:

  • New orders at 50.5, down from 55.9 in June.
  • Production or sales at 52.6, down from June's 53.8.
  • Delivery lead time at 58.4, down from 63.6 in June.


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