Survey: Economy remains weak in Midwest

The economy in nine Midwest and Plains states likely will remain sluggish because of weakness in ethanol and food production, but conditions vary widely across the region, according to a report released Monday.

The overall economic index for the region remained in negative territory at 48 in November based on the monthly Mid-America survey of business leaders. The index was slightly better than October's 46.5, but any score below 50 suggests the economy will contract over the next three to six months.

Creighton University economist Ernie Goss said weakness in nondurable-goods producers, such as food and ethanol makers, combined with worries about the health of the global economy to slow business in the region.

The survey covers Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota. Goss said that in November businesses in Iowa, North Dakota and Oklahoma outperformed the rest of the region.

The survey of business leaders and supply managers that Goss oversees uses a collection of indexes ranging from zero to 100. Survey organizers say any score above 50 suggests growth in that factor while a score below 50 suggests decline for that factor.

The business leaders surveyed turned pessimistic about the economy in November. The confidence index plummeted into negative territory at 43.5 in November from October's 58.

"Both the fiscal cliff and the uncertainty surrounding health care reform were reported by supply managers as negatively affecting their economic outlook," Goss said.

The region's employment index inched into positive territory at 50.5 in November, up from October's 47.7. Goss said durable goods manufacturers are hiring at a slow pace but that employment growth is being offset by job losses at nondurable-goods producers.

The prices-paid index, which tracks the cost of raw materials and supplies, improved to 64.4 in November from October's 71.5. But the index still suggests costs are increasing.

The inventory index remained in negative territory at 44.9 in November although it was slightly better than October's 43.5.

"Supply managers have now cut inventories for five straight months. The last time this happened was in 2009 when supply managers were reducing inventories in anticipation of weaker business activity," Goss said.

The export index fell to 47.9 in November from October's strong 60.8 reading. The import index also declined to 42.6 in November from 44.2 in October.

The other components of November's overall index were:

• New orders grew to 46 from October's 43.3.

• Production or sales improved to 46.6 in November, from October's 43.9.

• And delivery lead time declined to 51.8 from October's 54.1.