Despite rising inflation and the housing slump, middle America's economy improved somewhat in April thanks to stronger farm incomes and biofuel production, according to business survey results released Thursday by Creighton University.

And with help from exports and rising ethanol production, Minnesota's leading economic indicators contributed to the regional upswing for the first time since October.

Creighton's nine-state Business Conditions Index rose to 55.5 in April, up from 54.3 in March. Minnesota's index rose to 55.1 in April from 44.8 in March. Figures below 50 signal economic contraction; above 50 indicate economic expansion.

For Minnesota, the survey revealed strong export sales because of the weakening U.S. dollar, said Ernie Goss, economist and author of the Creighton report. "Minnesota has some really important exporters, so that is not a small factor" in the economy, he said.

April also showed improvement in new orders, production and delivery lead times, especially in computer and electronic equipment and machinery, Goss said. The state's employment index also reached 50, signaling a stabilization after months of layoffs in the housing, construction and manufacturing sectors.

"Even with the significant downturn in residential construction in the state, Minnesota's unemployment rate has risen by only 0.2 percent over the past year," he said.

"I expect the state's unemployment rate to stabilize at its current level until the end of the summer, when it will begin to move lower," Goss said.

Minnesota has been hard hit by the housing downturn; mortgage companies, Andersen Windows & Doors, timber companies and construction board makers and even shingle businesses have suffered.

Goss noted that Minnesota computer, electronics, machines and other durable goods in April helped offset weakness in processed foods, which suffered from high feed and fuel prices. However, transportation equipment and parts manufacturers reported significant downturns during the month.

Nationally, the Institute for Supply Management reported separately Thursday an April index of 48.6 for manufacturers, unchanged from March despite falling figures for employment, production and new orders.

The state, regional and national reports all showed significant inflation because of rising prices for energy, raw materials, grain and other commodities. Higher prices have pushed the inflation gauge to its highest level since the survey began in 1994, Goss said.

The Federal Reserve cut a key short-term interest rate by a quarter of a point again this week, but Goss thinks the time for rate reductions is over.

"In my judgment, current inflationary pressures in the pipeline will force the Fed to forgo any more rate cuts for 2008," Goss said. "Despite a very weak national economy, inflation is the most ominous problem facing the Fed."

Midwest supply managers reported being significantly less optimistic about the next six months. Their confidence-level index fell from 38 in March to 29.4 in April as worries over inflation and the housing and mortgage crisis weighed heavily.

The Minnesota Auto Dealers Association reported Wednesday that car and truck sales sank 2 percent nationwide and 14.5 percent in Minnesota. State dealers had expected a decline of 8.9 percent.

Still, economists remained somewhat more upbeat than suppliers.

Daniel Meckstroth, chief economist for the Manufactures Alliance/MAPI, said that the national Institute of Supply Management index of 48.6 percent in April "confirms that the manufacturing recession continues but that the severity of the downturn is on the mild side."

He acknowledged "worrisome" price increases in oil, food and metals and sales declines for household items, construction products, and motor vehicle industries. But he noted strength in aerospace, mining equipment, medical equipment and supplies and high tech, and stable growth in food.

Meckstroth added that "an important counterweight preventing the manufacturing recession from becoming much worse is that the declining dollar has made United States' exports very competitive in world markets."

Dee DePass • 612-673-7725