Iowa leading economic indicators show improvement

DES MOINES – Figures released Wednesday show Iowa's economic indicators rose in November compared to the same month a year ago, providing hope that Iowa's economy is slowly improving.

The Iowa Leading Indicators Index jumped .4 percent in November, marking the second month of increases after eighteen months of declines. The index, compiled by the Iowa Department of Revenue, is used to forecast the future direction of Iowa's economic activity.

“It's starting to turn around but we're not anywhere back to … average economic activity in the state,” said Amy Harris, an analyst with the revenue department.

Six of eight components of the Iowa Leading Indicators Index increased. Harris said if the positive signs are sustained, hiring gains could be seen in the late spring or early summer.

Unemployment claims in November were down 21.3 percent compared to November 2008, but still far above average November claims.

The number of building permits for residential housing units issued in November was up 9.9 percent over the number issued the same month a year earlier.

The ag sector also has shown improvement, driven by a decline in input costs for crops and livestock, Harris said.

Weekly average manufacturing hours sat at 40.5 in November, down slightly from 40.6 hours reported in October, but up substantially from the 38.1 hours a year earlier.

“The people they have deployed right now are kind of back to almost normal levels,” Harris said. “Whether they'll start hiring has yet to be seen.”

Diesel fuel consumption was the only negative contributor to the index, with consumption dropping 5.8 percent between November 2008 and 2009.

Iowa's economic trends typically have been behind national trends, which have seen recent improvements.

“We lagged going into the recession,” Harris said. “We still saw a lot of positive numbers well after the national numbers had turned negative, and so we're lagging on the way out this time as well.”

Harris said during the recession earlier this decade it was improvements in manufacturing hours, new orders, and new building permits that turned positive first.

Business leaders are looking for signs that Iowa's economy is headed toward a recovery.

A quarterly economic outlook survey by the Iowa Business Council showed little movement in the fourth quarter of 2009 compared to the previous quarter.

Elliott Smith, the council's executive director, said the only area of concern was that sales expectations moved down slightly in the most recent survey.

When sales steadily improve, it gives business owners and industries confidence to hire and invest in their infrastructure, machinery and equipment, he said.

Smith is cautiously optimistic that the business environment in Iowa and the Midwest is rebounding.

“There are some segments that are doing quite well, and they're helping to … hopefully pull up the rest of the business community,” Smith said.