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Oil, commodity prices hurt area's economy(Omaha World-Herald (NE) (KRT) Via Acquire Media NewsEdge) Jun. 2--Record-high oil prices and commodity costs have hurt Midwest companies and lowered a leading economic indicator for the region, an economics professor said Monday while releasing a monthly survey of manufacturing supply managers and business leaders. The Mid-America Business Conditions Index slumped to 49.6 in May from April's 55.5. It was the second time this year that the overall index, which ranges from 0 to 100, dropped below 50, indicating a contracting economy. Numbers above 50 indicate an expanding economy. February's reading was 49.5, while January's was 50.6 and March's was 54.3. "Unlike the national economy, the downturn in housing and related mortgage issues have had significantly less impact here," said Ernie Goss, an economics professor at Creighton University who conducts the survey across nine states. "However, record oil prices, combined with soaring commodity prices, have had significant and negative impacts on the businesses that we survey each month." Goss' survey includes Nebraska, Iowa, Arkansas, Kansas, Minnesota, Missouri, North Dakota, Oklahoma and South Dakota. A similar, national survey conducted by the Institute for Supply Management in Tempe, Ariz., showed an overall index of 49.6, up from April's 48.6, but still indicating a sluggish manufacturing industry. In Goss' survey, the index measuring inflationary pressures dipped slightly but remained high at 92.0 in May from April's 93.1. The Federal Reserve committee that sets interest rates meets June 24-25 and probably will not cut rates again this year, Goss said. Cutting interest rates could help stimulate the economy but increase the risk of inflation. "In my judgment, excessive inflation is the most ominous problem facing the Fed and the U.S. and regional economies," Goss said. Goss said his survey showed a monthly employment index dropping below growth neutral for the fourth time this year at 46.8 for May, down from April's 49.0 and March's 52.4. Job losses were primarily in value-added services such as telecommunications and software publishing, while growing exports and agricultural-equipment sales pushed heavy and light manufacturing job growth into positive territory for the month, Goss said. New export orders helped the regional economy in May, with a cheap dollar making U.S. goods less expensive abroad. The export orders index was 58.0, up from April's 56.6. Imports were at 56.4 in May, up from April's 55.3. Economic optimism for the next six months remained weak at 38.2, though up slightly from April's record low of 29.4, Goss said. Other components of the overall index included new orders at 47.8 in May, down from April's 55.0; production at 47.3, down from 55.0; inventories at 52.7, down from 56.4; and delivery lead time at 58.5 in May, down from 59.2 the month before. In Nebraska, the overall index dipped to 50.3 from April's 51.0.Durable-goods producers, especially those with strong ties to the farm economy, such as agricultural-equipment manufacturers, reported strong growth for May, but information firms, such as publishing companies, detailed pullbacks in business activity, Goss said. In Iowa, the overall index dipped to 56.6 in May from April's 60.5.Durable-goods producers had stronger growth, while nondurable goods manufacturers reported pullbacks, Goss said. --Contact the writer: 444-1117, [email protected] To see more of the Omaha World-Herald, or to subscribe to the newspaper, go to http://www.omaha.com. Copyright (c) 2008, Omaha World-Herald, Neb. Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. |