Iowa Public Television


Mid-America Business Conditions Index Finds Positive Growth

posted on September 6, 2013

The economic numbers delivered a mixed message this week.  On one hand, spending for goods and services has increased but the number of people making those goods or providing those services has decreased.

According to the Labor Department, the unemployment rate fell to 7.3 percent. While this is the lowest rate since 2008 - the depths of the Great Recession – the lower number fails to reflect people who have stopped looking for work and are no longer being counted.

Spending on U.S. construction projects rose 0.6 percent to its highest level in more than four years.

Orders to U.S. factories fell 2.4 percent in July - the largest drop in four months.

Orders for core capital goods, a measure of businesses confidence, fell 4 percent in July.

And the Commerce Department says the trade gap rose 13 percent to $39.1 billion as imports increased and exports fell back.

Predicting what will happen with the economy is akin to predicting the weather.  You can make a guess but to make an informed decision you need hard data. For nearly two decades, the folks that put together the Mid-America Business Conditions Index at Creighton University have been gathering information about new orders, production, sales and employment in states from North Dakota to Arkansas.  This week, they released their most recent snapshot of the economy and used it to make predictions about the next 9-months.

Mid-America Business Conditions Index Finds Positive Growth

As the numbers of the Mid-America Business Conditions Index suggest, the monthly survey found positive growth between July and August.  According to this month’s report, economic prospects are on pace to close out 2013 at a slight uptick in the nine Midwestern states where data is collected.  Despite the positive outlook, the numbers are down from this time last year.

While the index rose three-tenths this month to settle at 53.8, experts caution the numbers are still down from stronger growth in the first quarter of this year.  The index uses a scale of zero through 100, with 50 being considered “growth neutral”.  Numbers above this mark indicate growth.

Ernie Goss/Economist – Creighton University: “This economy, I’ll say is limping along, not nearly as strong as we’d like to see.  Heading into the fourth quarter of this year our surveys indicate that growth for the fourth quarter of 2013 is not going to be as strong as what we saw in 2012, and of course we’ve got what’s going on in the Middle East, or not going on.  That’s creating some real uncertainties, pushing up oil prices, of course, that’s spilling into our survey.”

Crude oil prices climbed to their highest level in more than two years before dipping slightly this week as the immediacy of military action in Syria diminished. Investment analysts, however, citing the uncertainty of expanded regional conflict, expect the bullish sentiment to continue. Congress reconvenes Monday, where the issue of Syria is expected to take center stage.  

Meanwhile, job numbers in the Index took a hit, dropping from 55.3 to 52.8 over the two-month period.   

Ernie Goss/Economist – Creighton University:  

“Durable goods continue to outshine the non-durable goods in the area.  Food processing is looking better.  Agriculture, anything connected to agriculture, and this is very, very important for this part of the region, agriculture is very important. The growth is not as strong for companies that produce agricultural equipment, not nearly the growth that we’ve seen, and the air is coming out of the agriculture bubble, but that’s not such a bad thing.  We’ve had a heckuva lot of air in that bubble for agriculture and it’s pushed up the overall economy.”

Exports broke the growth neutral plane in August, rising briskly to 56.2, up from 50 in July, while imports slumped.  The numbers have trended lower in recent months, reflecting a slowdown in global growth.

Ernie Goss/Economist – Creighton University: “The Federal Reserve is going to control a lot of that.  And unfortunately, they’re going to be raising rates.  I expect at their September the 17th and 18th meeting, I think they’re going to say ‘we’re going to begin tapering the bond purchasing’.  Now what the heck does that mean? That means interest rates are going to begin rising a little bit more.  What that means is the value of the dollar will rise.  What that will mean is that puts a downward pressure on exports, particularly agriculture.  So again, looking ahead, ag and connected to ag are not going to be nearly as strong in 2013 fourth quarter as they were in for 2012 fourth quarter.”



Tags: august crude oil Ernie Goss exports index job numbers July Mid-America Business Conditions Index monthly survey