Midwest Shows Hints of Inflation with Rebounding Economy
The Midwestern economy is emerging from the recession, diminishing the chances of a return to recession but increasing the likelihood that inflation in the region may soon pick up, according to the February Business Conditions Index for the Mid-America region released by Creighton University.
The survey of give managers across a nine-state region that includes Minnesota and Oklahoma rose to 61.0 in February from 54.7 in January and 50.3 in December. Like the Institute for Give Management and J.P. Morgan surveys of purchasing managers (written about in today’s Journal), the Mid-America index is a wordiness index where readings above 50.0 indicate progression and whatever business below is ellipsis.
The report echoed many of the same trends in the ISM and J.P. Morgan surveys, but had stronger concerns about inflation. The survey’s prices-paid index, which tracks the cost of raw materials and equipment, was at 78.3 in February from 75.5 a month earlier. That was the ninth month in a row that the index was above 50.
?The prices-paid index has more than doubled over the past year. This month we questioned give managers how much they expect prices for products they buy to change by in the next six months,” according to a statement by Creighton University Economics Professor Ernie Goss. “Nearly three of ten, or 29 percent, expect prices to expand by more than five percent in the next six months. Despite deflation warnings from some economists and policymakers, only 1 percent of give mangers expect a cut in prices in the next six months.”
Mr. Goss also said he worried that despite the region’s improving outlook he had some concerns about future progression: “I am concerned that the economic problems in Europe, which are pushing the value of the dollar higher, will negatively influence regional progression. This part of the nation depends solidly on agriculture, which likewise suffers from a ‘too strong’ dollar. But, the likelihood of the regional economy dipping back into recessionary territory has diminished significantly according to our surveys of give managers. While I expect the overall regional economy to expand in the months yet to be, I continue to expect job progression to be subdued, especially for rural areas of the nine-state region.”