Iowa Public Television

 

Mid-America Business Conditions Index Rises in March

posted on April 9, 2010


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In a decision with significant ramifications for rural America, a U.S. Appellate Court ruled that the Federal Communications Commission, or FCC, does NOT have the authority to require broadband providers to give equal treatment to all Internet traffic flowing over their networks.

The decision was a major victory for Comcast Corporation, the nation's largest cable company, which had challenged the FCC's authority to impose such "network neutrality."

Nevertheless, the FCC says it intends to move forward with sweeping plans to increase broadband usage and Internet speeds -- especially in poor and rural areas where access is much more limited.

Rural America typically lags behind urban centers when it comes to economic recoveries as well. But, a key barometer of business conditions in the Midwest is showing signs of improvement. Paul Yeager explains.

As America struggles to recover from its worst economic downturn since the Great Depression, the sub-prime mortgage meltdown; inadequate regulation of the financial industry; and unbridled greed have been blamed for nearly toppling the global economy.

And while many economists focus on Wall Street, little attention has been devoted to the downturn's impact on Main Street.

But in the heart of the "Grain Belt," a team of researchers assesses economic vitality in "The Heartland" by surveying rural bank CEOs and nearly 1,000 purchasing managers.

Ernie Goss, Creighton University Economist: "These are the men and women at the front line of the economy. If they're buying, that soon spills over into the economy. That's the theory behind it. Its a leading economic indicators. We've been doing it for, since 1994. We get a good beat on the economy. And during that time we've had two recessions, we picked them both up in advance."

The "Mid-America Business Conditions Index" is compiled from surveys conducted in nine Midwestern states. The finished product is emailed to 5,000 recipients -- each with different perspectives and interests.

Terry Moore is president of the Omaha Federation of Labor AFL-CIO and a Bank Officer for the Federal Reserve Bank of Kansas City. He reads Goss' survey and sources the data in reports to the Reserve Bank board.

Terry Moore, Omaha, NE/AFL-CIO: "That research that is right to the point to very hot, news, that they don't have yet. When were talking to a car dealership, were getting his reports of this week, and were talking about the transportation of goods we're getting them as of today. When we talk about the railroad, or furloughs, which they would not have any of that information, or the idea of that, so were going to give them information that hasn't even been done yet, ‘cause we know this layoff is happening in the next to-two weeks, hiring is happening in the 2-3 days, or whatever may be."

The survey asks supply managers nine basic questions about production orders, exports and inventory.

Creighton University graduate students compile survey results into charts and graphs. Goss then meets with researchers, faculty colleagues, and even Federal Reserve Board representatives to analyze and interpret the data.

When Market to Market first visited Goss and his team six months ago, Six months ago, when we first visited Goss and his team, the Index was declining. But in the time since, the survey has seen four months of growth, to the highest level in nearly four years.

Ernie Goss, Creighton University Economist: "That's very good news. And its much like the news we're getting from the national survey of supply managers, these supply managers are the canary in the coal mine. In other words, when they see things positively, new orders up, sales, employment, other factors up, generally is spills over into the rest of the economy in the months ahead."

The Business Conditions Index for March ended at 64.3. Since anything over 50 indicates growth, the tally represents a strong rebound from the bottom of 33 posted in December of 2008.

Last September, Goss and his colleagues said the farm economy was dragging on other sectors of the rural Midwestern economy.

Dr. Tony Hendrickson, Dean, Creighton School of Business: "Prices are going to rebound, negative effect on production of ag products."

Ernie Goss, Creighton University Economist: "Then how much of this is ag related? Income down 25%. If you look at the rural survey, banks, not good. Seeing farm equipment sales not doing well at all, that's spilling out over to the Main Street survey."

Hendrickson "I think that explains an effect in downed retail sales. As the ag economy tends to be more cyclical, more recessions, more cutbacks and problems, in our history, different from than regular recession, I think people in rural areas have learned to say, times are hard, they stop spending. They respond with cutbacks in spending much quicker than the rest of the economy because they're more used to downturns."

Ernie Goss, Creighton University Economist: "Whether its negative or positive, its right on the border, its not that positive."

Goss claims a stronger dollar and disagreements with chief trading partners have threatened to reduce agricultural exports. He predicts a mid-year reversal on both trends will make goods like beef, and energy commodities like coal, more competitive abroad.

March results were strengthened by the region's value-added sectors and manufacturing sectors.

Ernie Goss, Creighton University Economist: "New export orders are very strong. In fact, the strongest since the recession started in the summer of 2007. So this is very promising, we're going to see more and more sales abroad, expansions in Asia."

According to Goss, the growth is beginning to ripple into the all-important labor market. Two of the nine states in the survey reported job growth in March. Goss believes the remaining states will see job growth by the end of 2010 and, in general, he's bullish on the short-term economic future of "The Heartland."

Ernie Goss, Creighton University Economist: "Overall it looks good. The economy is expanding. So it was a good report in March"

 


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