Midwest business conditions improve in November

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

The Creighton University Mid-America Business Conditions Index rose slightly to 46.5 in November from 43.8 in October, remaining below growth neutral for the fifth consecutive month.

'Due to the heavy dependence of the region on agriculture and energy, I expect the overall regional economy to continue to underperform the national economy,” said Ernie Goss, director of Creighton University's Economic Forecasting Group, in a news release. 'Despite the decline in manufacturing, the non-manufacturing sector of the regional economy is expanding, albeit at a slow pace.”

The regional employment gauge indicates the nine-state manufacturing sector continues to lose jobs, as the index dipped to 41.9 from October's 44.4, falling below growth neutral for the sixth straight month.

'The growth gap between regional manufacturing and non-manufacturing remains wide,” Goss said. 'Over the last 12 months, U.S. Bureau of Labor Statistics data indicate the region's manufacturing sector lost more than 16,000 jobs - a 1.2 percent decline - while regional nonmanufacturing sector added almost 102,000 jobs, an increase of a subpar 0.8 percent.”

Looking ahead, supply managers indicated they expect their businesses to increase 2017 wages by 2.7 percent above 2016 levels. Goss said manufacturing wage growth continues to expand in the region, but at a tepid pace.

The November Business Conditions Index for Iowa sank to 48.3 from October's 48.9. The survey found durable and nondurable goods manufacturers experienced pullbacks in economic activity.

Goss expects the Federal Reserve to raise interest rates at the December meeting of the rate setting committee,

'Markets will be paying close attention to remarks coming out of the Fed (Reserve Board's) meeting on Dec. 14,” he said. 'Language indicating more rate hikes to follow will jolt markets.”