Economist Says Midwest Recession Worst In 25 Years

Nebraska economist said the results of the Mid-American Business Conditions Survey point to a worsening recession at least through September.

OMAHA, Neb. (AP) -- A Nebraska economist says his regional business conditions survey suggests the recession is the worst in the past 25 years.

Creighton University professor Ernie Goss says the overall index for the Mid-America Business Conditions Survey of supply managers and executives has been wallowing in negative territory, although it has been rising of late.

According to a survey report released Wednesday, the index climbed to 39.7 in March from 34.6 in February and 33.5 in January.

The survey's index ranges between 0 and 100, and any score below 50 on the index suggests a contracting economy over the next three to six months.

"Since October 2008, the overall index from the survey has been in record low territory and is significantly lower than in the last national recession," said Goss. "This recession is stacking up to be the most severe economic downturn in the past 25 years."

And, Goss said, the March figure indicates a worsening recession at least through September.

The survey states are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.

Despite the wealth of bad economic news, the survey's confidence index jumped to its highest figure since January 2007: to 58.5 in March from 31.5 in February and 23.6 in January.

"Our survey was conducted after Treasury Secretary Tim Geithner announced the U.S. Treasury bank plan, but before the GM blowup," Goss said. "I think economic expectations as expressed by supply managers got ahead of the economic fundamentals."

The survey's March employment index rose to 34, compared with 33.1 in February and the record low of 29 in January.

"The recession definitely came to mid-America late," Goss said. "Between the beginning of the national recession in December 2007 and October 2008, the region gained more than 120,000 jobs. However, between October 2008 and January 2009, the region lost more than 200,000 jobs."

Despite lake-bottom interest rates and more federal spending, the region's inflation gauge is still indicating deflation at the wholesale level, Goss said.

The prices-paid index, which tracks the cost of raw materials and supplies, rose to 41.1 in March, compared with 37.7 in February and 34.1 in January.

Goss said he's concerned that the federal monetary stimulus "will result in excessive inflation once the economy has exited the recession sometime at the end of 2009."

The region's trade numbers remain weak.

"Economic weakness among our trading partners and a strong dollar continue to restrain exports," Goss said, but the regional new-export-orders index rose to 31.8 from February's 29.9 and January's record low 26.8. Also, the March import index rose to 44.5 from 38.7 in February and 39.1 in January.

Other components of March's overall index were:

-- new orders at 40.7, up from 30.7 in February;

-- production at 39.9, up from 30.2 in February;

-- inventories at 39.7, down from 39.9 in February;

-- and delivery lead time at 44.3, compared with 48.4 in February.

Goss and the Creighton Economic Forecasting Group have conducted the monthly survey since 1994.

The Institute for Supply Management, formerly the Purchasing Management Association, began to formally survey its membership in 1931 to gauge business conditions. The Creighton Economic Forecasting Group uses the same methodology as the national survey.

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