Confidence fading in Midwest economy despite growth

OMAHA, Neb. (AP) -- Confidence among business leaders is fading in a nine-state region that includes Minnesota despite indications of continued economic growth, according to a monthly survey released Wednesday.

The overall economic index in the Mid-America Business Conditions Survey dropped to 56.3 in September, down from 60.2 in August -- its highest level in more than three years -- said Ernie Goss, the Creighton University economics professor who conducts the survey of business managers.

A reading above 50 indicates economic growth, while a reading below 50 indicates economic loss.

The survey's overall index continues to point to economic growth, just not as strong as in past months, Goss said. With that in mind, Goss was surprised that many business leaders expressed concern about the future.

"Each month we ask survey participants their expectations of the economy six to nine months out. For September, they were decidedly less optimistic," Goss said.

Goss conducts the survey in nine states to produce a leading economic indicator of the Midwest. States included are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma, and South Dakota.

Despite continued strength for most factors in the September survey's overall index, employment remains soft in the region, Goss said.

"Employers report adding few jobs even as the pace of economic activity improves," Goss said. "Companies continue to pinch costs, either by reducing labor costs or by trimming inventories.

"Just as in past months, businesses have met production and sales targets without adding significantly to their payrolls by enhancing productivity and by increasing the hourly work week," he said.

For the third straight month the prices-paid index rose. The index, which reflects prices of raw materials and supplies bought by purchasers, increased to 59.9 from August's 56.4.

"The economic upturn along with a weakened dollar and higher energy prices are pushing the regional inflation gauge higher," Goss said.

Economic weakness among U.S. trading partners trumped a cheaper dollar pushing the new export orders index down to 48.6, its lowest point this year.

As for individual states, Kansas saw the sharpest decrease in its economic index, from 63.9 in August to a regional low 50.6 in September. South Dakota had the sharpest increase, from 56.7 to a regional high of 77.

On The Net:

Mid-America Business Conditions Survey:

http://www.outlook-economic.org