Midwest business conditions improve, little sequester impact

A survey of businesses in Iowa and other Midwestern states showed improving conditions in March, primarily due to rising manufacturing orders.

The monthly Mid-America Business Conditions Index from Creighton University in Omaha, which ranges between zero and 100, climbed to 58.2 in March from February's tepid 53.1. Readings higher than 50 indicate an improving economy, while readings below 50 show a contracting economy.

Ernie Goss, director of Creighton's Economic Forecasting Group, said the March increase was the largest single-month recorded since January 2012.

"We will have to record several consecutive months of readings like this to be confident that the regional economy is picking up steam," Goss said. "The strongest new orders growth in two years was the prime factor boosting the overall index higher."

Looking ahead six months, economic optimism, as captured by the March business confidence index, expanded to 58.2 from February's weaker 50.6.

"This month we asked supply managers how the federal spending sequestration was affecting their company," Goss said. "More than three-fourths, or 76.3 percent, indicated that the cuts were having no impact on their company.

"The remaining 23.7 percent reported only modest impacts. None of the businesses reported significant impacts."

Regional inventory levels increased for the month and at a faster pace compared to February. The March inventory index increased to 58.1 from February's 52.2.

"Companies in our survey have now expanded inventory levels for four straight months," Goss noted. "This inventory accumulation will add to regional growth in the months ahead. This is another indicator of improving business confidence."

Iowa's Business Conditions Index increased for the third straight month.

The overall index rose to 65.5, a regional high, from February's 64.6. Components of the index for March were new orders at 69.5, production or sales at 74.2, delivery lead time at 51.9, employment at 65.4, and inventories at 66.5.

"The Iowa economy is experiencing very broad-based business gains," Goss said. "Durable goods producers, especially metal manufacturers and agriculture equipment producers, continue to expand at a very brisk pace.

"Our surveys over the past several months point to a continuation of the healthy growth with gains in both jobs and average hours worked for most industries"