CORONAVIRUS

Iowa, Midwest business sentiment sours

Pandemic cited for shipping delays, hiring concerns

A custodial worker is seen in a skywalk over Second Avenue SE in Cedar Rapids on Friday, March 27, 2020.  (Rebecca F. Mi
A custodial worker is seen in a skywalk over Second Avenue SE in Cedar Rapids on Friday, March 27, 2020. (Rebecca F. Miller/The Gazette)

Two newly released and broad-reaching economic reports show a sharp drop in business sentiment in Iowa and across the Midwest — directly attributed to the effects of the COVID-19 pandemic.

Creighton University’s Business Conditions Index, which ranges between 0 and 100, tumbled in March to 46.7 from February’s 52.8. The index — which looks at Iowa and eight other Midwestern states — had registered above 50 during the past three months.

And the overall economic outlook index for the next six months in the Iowa Business Council’s first quarter survey recorded one of its lowest points since 2009.

“COVID-19 had a smaller impact on the manufacturing sector than other areas of the economy more directly tied to the consumer,” said Ernie Goss, director of Creighton’s Economic Forecasting Group.

“I expect negative impacts for manufacturers to worsen in the next month since almost two-thirds of supply managers reported that the coronavirus produced shipping problems to and from vendors.”

Goss said Creighton’s survey showed that eight of 10 supply managers reported the coronavirus had caused the cancellation of business meetings, and 54.3 percent indicated that the virus had produced worker absences for the month.”

Several supply managers reported the coronavirus had produced shipping delays that resulted in depleted inventory.

The March employment index slumped to 34.7, from February’s already weak 46.4.

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“Last Thursday, the U.S. Department of Labor reported the number of initial claims for unemployment insurance for the nine-state region rose to 272,540 from 16,628 the week before,” Goss said. “This represents more than a 16-fold increase in initial claims compared with a lower 11-fold increase for the rest of the nation.”

The Labor Department was expected to release fresh numbers on Thursday.

Looking ahead six months, economic optimism, as captured by the March Business Confidence Index, plunged to a record low 14.5 from February’s 51.4 and January’s 58.8.

“The emergence of the coronavirus swamped the positive impact of the recent passage of the U.S. Canada, Mexico trade agreement and Phase 1 of the trade agreement with China,” Goss said.

The regional trade numbers were very negative for the month, with new export orders tumbling to 34.7 from February’s 58.

“On the other hand, the evolving coronavirus reduced international buying by supply mangers as the import index fell to 32.7, from 40.4 in February,” Goss said.

Approximately 55.3 percent said the coronavirus had pushed their company to switch to, cease or reduce international buying. More than one in three, or 34.3 percent, of supply managers indicated the virus has caused their company to switch some purchases to domestic suppliers.

In the Iowa Business Council survey, released Thursday, some 55 percent of respondents said they anticipated their employment will remain the same in the next six months. But about 30 percent expected those numbers will drop.

A measure below 50 indicates negative sentiment.

On a related note, more than half of the respondents said they expected sales will fall by more than 50 percent in that time period.

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And while more than 20 percent projected their capital spending will increase in the coming six months, better than 35 percent believed it will be “substantially lower.”

The survey’s overall economic outlook index declined to 37.5 — down from the fourth quarter 2019 projection of 60.09 an IBC news release said.

“Iowa Business Council members’ sentiment reflects the broader economic uncertainty the country is currently facing,” IBC Board Chairwoman Mary Andringa said in the release.

“Our members remained focused on the health of our employees and maintaining our operations as best as possible given the global pandemic. We know Iowans will pull through this together.”

IBC’s 22 member companies include Alliant Energy, Casey’s General Stores, Collins Aerospace, Deere and Co., Fareway, Hy-Vee, the Iowa Bankers Association, MidAmerican Energy, University of Iowa Health Care and UnityPoint Health.

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