Survey suggests growth ahead for Midwest economy

A regional economic index has hit its highest level since May 2006.

The Business Conditions Index for Mid-America includes Minnesota, Iowa and North and South Dakota. The Minnesota index has remained above the growth neutral level, signaling economic expansion for eight straight months.

Creighton University economist Ernie Goss conducts the survey of supply managers. He expects modest job gains in Minnesota in the first and second quarters of the year. He said low interest rates and a stabilizing job market are behind economic optimism of supply managers in the Mid-America region.

The overall business conditions index for the Mid-America region hit its highest level since May 2006, and the index remained well above the growth neutral score of 50. The March index hit 64.3, outpacing February's 61.

The index ranges from zero to 100. Any score above 50 suggests economic growth in the next three to six months, while a score below 50 suggests a contracting economy in the coming months.

Goss said 28 percent of companies expect to hire workers in the next six months, but 61 percent plan no hiring and 11 percent predict layoffs. Therefore, the overall unemployment rate may not improve significantly in the nine states covered by the survey: Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.

"I expect unemployment rates for most states in the region to remain at elevated levels as firms remain overly cautious about hiring new workers," Goss said.

The survey's employment index increased in March to 57.9 from February's 56.1.

The supply managers remain optimistic about the economy because of low interest rates and a stabilizing job market, Goss said. The March confidence index declined slightly to 70.1 from February's 73.

Manufacturers say the prices of raw materials are rising, so consumers are likely to see inflation later this year. The survey's prices-paid index climbed to 80.5 in March from February's already-high 78.3.

The March inventory index increased slightly to 57.5 from February's 57.4, suggesting that businesses are restocking after more than a year of inventory reductions.

The exports index increased to 61.6 in March from February's 55.4 as the global economy continued to improve.

The import figure declined slightly to 57 in March from February's 58.8.

Other components of March's overall index were:

- New orders climbed to 72.1 from February's 66.1.

- Production or sales increased to 72.2 from February's 67.3.

- Delivery lead time increased to 61.8 in March from February's 58.4.

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On the Net: Creighton Economic Forecasting Group

(MPR reporter Annie Baxter contributed to this report.)

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