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Inflation, economic growth slow in region
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OMAHA, Neb. -- Economic growth slowed during October in the nine-state Mid-America region, which includes Minnesota, while inflationary pressures continued to decline, according to a monthly survey of supply managers and business leaders.
But Creighton University economics professor Ernie Goss said Wednesday that falling oil prices and stable interest rates sparked some optimism among supply managers.
"Comparing this year's survey results with previous years indicates an upturn in Christmas buying over last year," Goss said. "However, the increase will be modest by historical standards as the economy deals with elevated energy prices and a downtown in the housing sector."
The overall Business Conditions Index dropped in October to 55.1, its lowest level since April 2003 and down from September's 57.
The Mid-America index surveys supply managers and business leaders in Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.
The prices-paid index, which measures inflation at the wholesale level, declined to 73.1 which is its lowest level since July 2005 and down from 75.2 in September.
"As growth has slowed inflationary pressures have cooled," Goss said. "With growth and inflationary pressures moving lower, I expect the Federal Reserve to make no change in short-term interest rates for the remainder of 2006."
Goss also said a cut in rates was possible.
The Business Conditions Index ranges between 0 and 100. An index of 50 or greater indicates an expanding economy over the next three to six months. And index less than 50 indicates a negative outlook.
Goss said the confidence index, which tracks survey participants' economic outlook six months down the road, rose to 55.8 from September's 51.2 and August's anemic 47.4
The employment index for the region declined for the fifth straight month to 54.2 from 56.5 in September from August's 57.0.
"Although the region added jobs for October, businesses are reporting clear and significant pullbacks in growth for new hiring," Goss said. "I expect job growth in the final quarter of 2006 to be about 80 percent of the gains for the second quarter of this year."
He said the downturn would occur mostly in durable goods manufacturing.
October's trade numbers were improved, as new export orders pushed the rating to 54.9, the highest since May, and well above the 50.6 posted in September.
Other components of October's overall index were: new orders at 55.6., relatively unchanged from September's 55.8; production at 55.7, down from 60.1; inventories down to 56.3 from 57.1; and delivery lead time at 53.3, down from 54.6.
The Creighton Economic Forecasting Group has conducted the monthly survey since 1994.
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