Sluggish growth, fallout from budget cuts expected

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Posted: Friday, March 1, 2013 12:00 am

A regional economic index of nine states slipped in February, with supply managers pointing to sluggish growth for the region in the coming months and some negative fallout from the sequestration budget cuts.

“Even though the housing sector is clearly getting back on its feet, manufacturing, especially manufacturing connected to global markets, continues to restrain overall growth for the region and nation,” said Ernie Goss, director of Creighton University's Economic Forecasting Group.

Of the sequester, Goss said, “It is clear that this had a negative impact on supply managers' economic outlook this month.”

Overall, Goss anticipates the Midwest economy, like the national economy, will remain on a sluggish course for the next three and six months.

The Business Conditions Index decreased to 53.1 from 53.2 in January. It was the second consecutive month the index — which ranges between 0 and 100, with an index higher than 50 indicating growth — remained above growth neutral. It's based on surveys of business supply managers.

Confidence dropped to 50.6 from 56.6. About 35 percent of companies surveyed said they expect the sequestration to result in a drop in unit sales for their company. One supply manager said that the sequestration “is a big question mark for us since we do a lot with first-tier suppliers to the government.”

Employment climbed above growth neutral to 51.6 from 48.9. Wholesale prices grew to 72.6 from 71.8, and inventories declined to 52.2 from 55.

Nebraska was below growth neutral for the second time in three months as the state's index dipped to 48.7 from 50.5. Nebraska's new orders were at 50.2, production or sales at 47.5, delivery lead time at 48.8, inventories at 52.8 and employment at 44.3.

“Contrary to other states in the region, Nebraska's unemployment rate has declined and the labor force has expanded since the national expansion began in 2009,” Goss said. “However, according to our surveys over the past several months, this very positive trajectory is now ending with slow to no growth projected for the next three to six months.”

Iowa's index increased for the second consecutive month to 64.6, a regional high, from 59.8. The state's index has been above growth neutral for 38 consecutive months. New orders were at 70.7, production or sales at 71.1, delivery lead time at 58.4, employment at 62.5 and inventories at 60.3.

“For the first time since the economic recovery began in 2009,” Goss said, “Iowa's unemployment rate has moved below 5 percent. Businesses in the state tied to energy and agriculture continue to experience healthy growth. Our surveys indicate that economic growth for Iowa will remain healthy for the next three to six months.”

Overall, almost half of the firms, or about 48 percent, said that they had expanded sustainable purchases of raw materials and supplies.

New export orders increased to 49.2 from 45.3 and imports grew to 53.7 from 50.7. Other components were new orders at 55.0, up from 52.3; production or sales at 55.5, up from 53.9; and delivery lead time at 51.1, down from 56.1.

Contact the writer: 402-444-1192, emily.nohr@owh.com

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