Midwest business conditions keep improving
St. Louis Business Journal
April 2, 2010
An index of business conditions for the nine-state area that includes Missouri rose for the fourth month in a row.
The March Business Conditions Index for the Mid-America region reached 64.3, improving on February's 61 and reaching the highest level since May 2006. A reading of 50 is considered growth neutral; higher points to growth.
The survey includes input from supply managers and business leaders in the region.
"The region's manufacturing and value-added services sectors are experiencing very strong business activity," Ernie Goss, a Creighton University economics professor, said in a statement Thursday. "I expect this increase in activity to extend over to the rest of the regional economy in the months ahead."
Goss said he expects overall job growth in the region during the first quarter, despite firms' continued cautious hiring. During the next six months, 28 percent of firms said they expected to add employees, and 11 percent predicted layoffs. The rest expected no change.
The regional employment index topped 50 for the third month in a row, reaching 57.9 in March, compared with 56.1 in February. There had not been three consecutive months of 50-plus readings since July 2007. Twenty-eight percent of supply managers said their firms added jobs in March; 12 percent said they would cut jobs.
Even so, Goss said, unemployment probably will stay high because businesses are "overly cautious about hiring new workers."
Prices also have been rising, with the prices-paid index -- which tracks raw materials and supplies costs -- more than 50 for the 10th consecutive month. It reached 80.5 in March, compared with 78.3 in February.
"While we have yet to experience rising inflationary pressures at the consumer level, record-low interest rates from the Federal Reserve, combined with the stimulative federal government spending, are creating price bubbles in various commodities and will ultimately contribute to inflationary pressures at the consumer level -- above the Fed's goal of 1.75 percent to 2 percent," Goss said.
He said he expects the Fed to raise the federal funds rate by a quarter of a percent before the end of the second quarter.
Find more about the state of the regional economy here.
