Midwest economy: Strong, with signs of inflation

Tuesday, June 1st 2004, 10:51 am

By: News On 6

OMAHA, Neb. (AP) _ The Midwest economy was strong for a fourth straight month in May but high gasoline prices helped fuel inflationary pressures, according to a survey of manufacturing executives.

The overall index in the Mid-America Business Conditions Index declined slightly in May to 67.3 from April's record 70.3, but it was above 60 for a fourth straight month, Creighton University economics professor Jim Knudsen said Tuesday.

An index reading above 50 indicates expansion, while one below 50 indicates a contraction in manufacturing activity.

In Oklahoma, the overall index dropped to 68 in May, from April's supercharged 82.3. Other readings for May were 78.1 for new orders, 71.9 for production, 59.4 for inventories, 56.3 for employment and 62.5 for delivery time.

Data from the U.S. Bureau of Labor and Statistics confirms employment growth with firms adding more than 16,000 jobs this year.

``I expect the Oklahoma employment picture to continue to improve for the remainder of the year,'' Knudsen said.

Solid economic growth for the region is expected at least through this year's third quarter, he said.

Nationally, manufacturing activity expanded for the 12th consecutive month in May, according to a similar survey done by the Institute for Supply Management. The national manufacturing index advanced to 62.8 in May from 62.4 in April.

Knudsen surveys business leaders and supply managers in a nine state region, including Nebraska, Iowa, Arkansas, Kansas, Minnesota, Missouri, North Dakota, Oklahoma and South Dakota.

The prices paid index for manufacturing materials, including steel, metal and energy products, was an unacceptably high 86.6, though a bit lower than the record 89.8 for April, Knudsen said.

Inflationary pressures in the Midwest and nationally probably will lead the Federal Reserve Board to increase interest rates at its June meeting, especially if job gains are above the 100,000 mark when the June 4 employment report is released by the Bureau of Labor Statistics, Knudsen said.

``We are beginning to see fallout from higher gas prices and cement shortages, along with continued higher commodity prices, which are beginning to reach the consumer,'' Knudsen said.

Despite rising prices and possible interest rate increases, confidence in the economy remained high at 71.4, Knudsen said.

New orders were a lofty 72.8 and production stood at 72.4, Knudsen said. The employment index was a solid 63 in May and it should continue to be strong through this year, Knudsen said.

``The nine-state region has added more than 70,000 jobs this year, six-tenths of a percent rate of growth,'' Knudsen said.