The August Creighton University Mid-American Business Conditions Index, an index which measures economic activity for the nine-state area ranging from Minnesota to Arkansas, showed a dip in economic activity below the point where the index indicates "growth neutral," or holding even. The indicators, each measured between 1 and 100, showed a range of lowered activity.
These begin with a measurement indicating general economic health, followed by a series of subcategories, some of which indicate decreasing economic activity. For example, the Overall Index, a general measurement, has fallen to 49.3 from July's 52.0. This drop below the growth-neutral 50 is the first such indicator in 32 months; all others have indicated above-growth-neutral ratings.
"The index is a diffusion index composed of an average change in various factors, some of the individual factors being new orders, production, inventories, deliver lead time and employment.
It is identical in structure to that of the National ISM, which can be seen at www.ism.ws," said Ernest P. Goss, Ph.D., Jack MacAllister chair in Economics, Department of Economics and Finance, Creighton University. The Institute for Supply Management publishes the ISM Manufacturing and Non-Manufacturing Report On Business.
Various factors affect these measurements, and not all for the same reasons.
They don't necessarily indicate trouble but merely show some aspects where a region may lag behind national economic average performance. For example, the regional trade issue shows a falling number, down from July's 44.7 indicator to 39.6 in exports, and the import index shows a slump to 42.3 from 43.8 in July. According to Goss, this factor is affected by, among other issues, the tariff conflict currently going on between the U.S. and China.
"By increasing the price of imports of raw materials and supplies, tariffs slow production," Goss said. "Also due to U.S. tariffs, our trading partners have increased tariffs on U.S. exports, thus slowing sales abroad (exports)."
In addition, regional businesses are a bit more cautious given present conditions, allowing their inventories of raw materials and stock to reduce, adopting a wait-and-see attitude.
But not all is cause for concern. Wholesale prices are showing a reaction to reduced inflationary pressures.
"Lower interest rates are a side effect of this," said Goss. "I expect the Federal Reserve to reduce short-term interest rates at their December 18 meeting." This is expected to reduce pressure on the economy, with net positives in indicators.