Economic conditions for Minnesota and other Midwest manufacturers slipped in February as factories braced for sagging sales from looming federal "sequestration" budget cuts, according to a closely watched Creighton University report issued Friday.
Some manufacturers fear sales will falter due to severe cutbacks that began Friday as Congress failed to produce alternatives before Friday's deadline.
"More than a third of companies [we] surveyed expect federal spending sequestration to result in a reduction in unit sales for their company," said Ernie Goss, the report's author and director of Creighton's Economic Forecasting Group.
The federal cuts, which make 9 percent across-the-board spending cuts to most federal programs, are expected to save the government $85 billion. But they are also expected to bring pain. The snipped funds traditionally help the poor, elderly, educators, and even government contractors and product suppliers.
In Minnesota, new product orders failed to grow and sales remained largely flat in February as sequestration worries dug in. Minnesota's business conditions index slid in February, despite showing mild job gains.
Concerns about sequestration and the global slowdown are not helping forecasts in Minnesota or the rest of the Midwest, economists said.
"Fiscal austerity is already having a chilling effect on the U.S. economy," said Scott Anderson, chief economist at Bank of the West. The "sequester goes into effect today. In response I have cut my forecast for second quarter GDP growth by 0.5 percentage points. But this assumes only one month of sequester."
Sequestration woes joined other troubles hitting Creighton's Mid-America region, which tracks Minnesota, Iowa, South Dakota, North Dakota, Kansas, Arkansas, Nebraska, Missouri and Oklahoma.
