Midwest business conditions slip in October

Weakness among manufacturers linked to agriculture and energy continued to weigh on regional economic conditions in October, according to a monthly survey of supply managers in Iowa and eight other Midwestern states.

The Creighton University Mid-America Business Conditions Index fell slightly to 43.8 in October from 45.5 in September, remaining below growth neutral for the fourth consecutive month.

'Due to the heavy dependence of the region on these two sectors, I expect the regional economy to continue to underperform the national economy,” said Ernie Goss, director of Creighton University's Economic Forecasting Group, in a news release. 'The growth gap between regional manufacturing and nonmanufacturing remains wide.

Over the past 12 months, U.S. Bureau of Labor Statistics data indicate that the region's manufacturing sector lost almost 19,000 jobs, a 1.4 percent decline, while regional non-manufacturing added almost 104,000 jobs, an increase of 1.0 percent.

While the supply managers surveyed are noticing rising wholesale costs, they are more concerned about the increased cost of insurance benefits.

'Even though wholesale price inflation remains in a range indicating only modest upward price pressures, I expect the Federal Reserve to raise interest rates at the December meeting of its rate setting committee,” Goss said. 'The year-over-year core consumer price index, which excludes food and energy, has risen above 2 percent for 11 straight months.”

The October Business Conditions Index for Iowa rose slightly to 48.9 from 48 in September. Metal producers and machinery manufacturers continued to experience downturns in economic activity.

Food processors, which had been boosting production and employment in recent months, reported cutbacks in business activity.

The supply managers were asked to gauge the importance of international markets to their company. More than one-third, or 34.9 percent, said selling abroad was an important contributing factor to their companies' revenues and profitability.