Iowa's business conditions index rises in September

A survey of supply managers at businesses in Iowa and eight Midwestern states found generally positive conditions in September.

The Mid-America Business Conditions Index rose for a second straight month. Surveys over the last several months point to positive, but slow growth for the final quarter of 2013.

The index, which ranges between 0 and 100, increased to 54.8 from 53.8 in August. Readings above 50 indicate an expanding economy, whereas those below 50 signal a contracting economy.

“Despite all of the domestic economic uncertainty, the Mid-America survey points to positive growth for the final quarter of 2013," said Ernie Goss, director of Creighton University's Economic Forecasting Group. "Growth among durable goods manufacturers more than offset pullbacks among nondurable producers and value-added service firms.

"Businesses linked to agriculture are experiencing much slower growth stemming from weaker agriculture commodity prices. Exports and farm income growth are down from earlier in the year.”

After moving below growth neutral for January, the region's employment gauge has remained above 50 for the past eight months. The September reading declined to a tepid 51.8 from 52.8 in August.

“Uncertainty surrounding the Affordable Care Act and the budget stalemates in Congress are causing firms to be much more cautious about hiring and have encouraged layoffs and cuts in hours worked," Goss said. "Nondurable goods manufacturers, especially those tied to agriculture and international markets are cutting employment and new hiring in the region."

Goss said supply managers were asked how the Affordable Care Act was affecting hiring in their company. More than one-fourth, or 26.3 percent, reported that the law, which takes effect Jan. 1, 2014, was making their firm more reluctant to hire new workers.

Overall 37.5 percent of supply managers indicated that their firms either cut hiring or reduced hours worked as a result of the ACA. Approximately, 62.5 percent reported no hiring or staffing impacts for their firm.

For each of the last seven months, supply managers were asked how the federal spending sequestration was affecting their company.

“In the September survey, approximately two-thirds of supply managers indicated that the cuts have had no impact to date," Goss said. "Slightly less than one-third reported only modest impacts from sequestration. Only 1 percent of businesses reported significant impacts."

The Iowa Business Conditions Index declined for a fourth straight month, but remains at a very healthy level. The overall index from a survey of supply managers for September slipped to a strong 63.3 from last month's 65.6.

Components of the index for September were new orders at 66.0, production or sales at 71.6, delivery lead time at 58.2, employment at 55.8, and inventories at 64.7.

“Iowa's durable and nondurable goods manufacturers are adding jobs at the healthiest pace in the region," Goss said. "Food processors and manufacturing firms with links to the automobile industry are expanding at a very strong pace."