Manufacturers face recession in Midwest

It's official. Midwest manufacturers are officially in a recession after leading economic indicators plunged to record lows in October, according to survey results released Monday by Creighton University in Nebraska.

The survey of business owners and supply managers across Minnesota and eight other Midwestern states showed that orders, exports, jobs and optimism tumbled dramatically last month. The overall Business Conditions Index dropped from 49.6 in September to 39.9 in October. Any number below 50 signals economic contraction.

"In the 14 years that we have conducted the monthly survey, October's was the weakest ever. The regional economy is now in a recession and I expect the downturn to deepen in the months ahead," said Ernie Goss, the Creighton University economics professor who wrote the report.

The nine-state survey covered businesses in Minnesota, Iowa, South Dakota, North Dakota, Nebraska, Kansas, Missouri, Arkansas and Oklahoma. Exports, which have been an economic booster for the Midwest for much of this year, faltered and fell to record lows in October.

Business owners say the credit crunch is limiting consumers' ability to finance cars, boats, motorcycles, and home remodeling projects.

"Our survey is reflecting two definite areas of concern. First, the pull back in global economic growth is putting downward pressures on new export orders. Second, a slowing mid-America economy is producing record low levels of imports," Goss said.

Woes in the Midwest seemed to echo nationally according to the Institute for Supply Management, which reported declines in new orders, production, employment and inventories. Economic activity for the country's manufacturing sector fell for a third month to an index of just 38.9 percent in October, the lowest level since 1982.

The Midwest, meanwhile faced "especially difficult," conditions for firms with connections to the automobile industry, Goss said.

Ford announced last month that it was furloughing union workers at the Ranger Truck plant in St. Paul for all of December after orders there continued to plummet. Ford reported Monday that Ranger sales fell 18.5 percent, while total Ford vehicles sales fell 30 percent last month.

It is not known if or how the declines will affect Minnesota. The Ranger truck plant here won a reprieve last summer with managers deciding to shut the plant in 2011 instead of 2009. But that decision came after the model saw a temporary increase in sales in response to the falling dollar and a rise in demand from Canadian consumers.

With sales off again, workers are wondering again about the fate of their plant, union officials said.

The Ford workers have plenty of company.

"Minnesota manufacturers, both durable and nondurable, detailed much weaker business conditions for October," Goss said. "I expect Minnesota's unemployment rate to expand to 6.5 percent in early 2009. Minnesota tends to more closely mirror the national economy than other states in the region, and the U.S. economy has been significantly weaker than that of mid-America in 2008," he said.

Across the region, optimism sunk to a record low index of 22.8, down significantly from 50.0 in August. One positive note for the region was that raw material prices fell significantly, from an index of 84 in September to 61.6 last month.