A survey of business conditions in Iowa and eight other Midwest states shows the regional economy is improving, but it still at a recessionary level.
The Creighton University Mid-America Business Conditions Index, which ranges between 0 and 100, increased to 43.5 in May from 35.1 in April, but down from March’s 46.7.
“COVID-19 had a less significant impact on the manufacturing sector than other areas of the economy more directly tied to the consumer,” said Ernie Goss, Creighton professor of economics who compiles the monthly index.
“This is a consumer-led recession with manufacturing lagging. Nonetheless, Creighton’s survey indicates that the regional manufacturing sector is trapped in a recession.”
The May employment index continued to indicate job losses, but at a slower pace than in April. The May index rose to 40.0 from April’s record low of 26.2.
“In the middle of March U.S. Department of Labor data showed that only 160,170 workers in the nine-state region were unemployed and receiving unemployment insurance benefits. This represented only 1.3 percent of individuals covered by the unemployment insurance system,” Goss said in a statement.
“By the first week of May 1,328,520 workers were receiving unemployment insurance benefits, or 10.5 percent of covered workers.”
ARTICLE CONTINUES BELOW ADVERTISEMENT
The Creighton survey found 34 percent of manufacturers extended the period of paying outstanding invoices, 35.9 percent revised or canceled contracts, and 28.2 percent moved purchases from foreign to domestic sources.
May’s wholesale inflation gauge indicated deflationary pressures with a wholesale price index of 48.6 for May, which was up from 44.0 in April.
“I expect to see deflationary pressures at the wholesale level in the weeks and months ahead despite the Federal Reserve’s, and the U.S. government’s record economic stimulus programs,” Goss said.
Looking ahead six months, economic optimism as captured by the May Business Confidence Index rebounded to 56.6 from April’s weak 45.5.
“The federal stimulus plan, the Federal Reserve monetary incentive programs and the rebound in U.S. stock markets boosted confidence from April’s low reading,” said Goss.
Iowa’s Business Conditions Index climbed to a low 41.9, from 34.4 in April.
“The state’s unemployment rate (not seasonally adjusted) jumped from 3.6 percent in March to 10.7 percent in April. The state lost 177,000 jobs in this one-month COVID-19 span,” Goss said.