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Archive for Wednesday, June 1, 2011

Exports aiding Midwest economic growth

June 1, 2011

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— Strong export numbers are boosting the economy in nine Midwest and Plains states, even though high raw material costs have hurt profits, according to a new monthly report released Wednesday.

The overall economic index for the Mid-America region rose to 60.2 in May from April's 57.7, which indicates good growth because the index is well above the neutral level of 50.

"While higher commodity prices have cooled regional growth a bit, our survey points to a healthy expansion in the months ahead with exports making a significant contribution to growth," said Creighton University economics professor Ernie Goss, who oversees the report.

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

The survey of supply managers and executives and the report use a collection of indexes ranging from zero to 100. Organizers say any score above 50 suggests economic growth in the next three to six months, while a score below 50 suggests a contracting economy.

The survey's prices paid index declined in May to 84.9 from April's 94, but continues to indicate significant inflation.

"The higher commodity prices, especially for energy products, are cutting into the profit margins of businesses that we survey each month," Goss said.

But even with the higher costs, companies in the region are adding jobs. The May employment index grew to 58.1 from April's already positive 54.

"Job growth was especially strong for firms more dependent on international sales and those with ties to agriculture," Goss said.

The business managers surveyed remain confident about the economy. The confidence index grew to 60.4 in May from April's 57.5.

But Goss said the business leaders believe that high commodity prices will limit future economic growth.

The inventory index grew to 58.9 in May from April's 53.7, suggesting that supply managers are expanding their stockpiles of raw materials and supplies.

The export order index grew to 60.1 in May from April's 57.1. The import index declined from April's 56.1 but remained in positive territory in May at 53.3.

"The cheap dollar and a global economic expansion combined to boost sales and new orders from abroad," Goss said.

Other components of the May index were:

  • New orders increased to 59.6 in May from April's 59.6.
  • Sales index grew to 60.9 in May from 59.5.
  • And delivery lead time increased to 63.6 in May from April's 62.

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