Midwest manufacturing sector has strong January

Monday, February 2nd 2004, 12:00 am
By: News On 6

OMAHA, Neb. (AP) _ The Midwest's manufacturing sector improved in January, indicating a strengthening economy even in the face of the nation's first case of mad cow disease, an economist said Monday.

The case of bovine spongiform encephalopathy was found in a Holstein cow in Washington state. The late December announcement prompted more than 30 countries to ban U.S. beef.

Domestic demand for beef has remained strong, however, and slaughter prices have rallied after a drop of about 18 percent.

``At this point, our survey is tracking little negative fallout from the ban,'' said Creighton University economist Jim Knudsen.

Creighton's monthly survey of supply managers and business leaders in nine states includes Nebraska, Arkansas, Iowa, Kansas, Minnesota, Missouri, North Dakota, Oklahoma and South Dakota.

The overall index for the Midwest was 62 in January, up from December's 55.9 and the highest reading since February 1997.

Index readings above 50 indicate expansion; readings below 50 indicate that manufacturing activity is contracting.

A similar, national survey released Monday by the Institute for Supply Management showed an overall index of 63.6, up from 63.4 in December.

Knudsen, associate director of Creighton's economic forecasting program, is conducting the Midwest survey while Ernie Goss of Creighton serves as a visiting scholar with the Congressional Budget Office in Washington.

Knudsen said the prices that Midwest manufacturers paid for raw materials and supplies increased from 68.2 in December to 75 in January. That sign of inflation could mean the Federal Reserve Board will increase interest rates as early as May, Knudsen said.

The employment index for January was 55.2, the eighth-straight month it was above growth neutral 50, Knudsen said. Employers appear to be more confident about the economic recovery and they have begun to hire new workers, he said.

An index tracking new orders rose to 68.4, and production increased to 67.4, Knudsen said. Both readings were at their highest levels in more than seven years.

The business confidence index rose to 83.5, its highest level since the survey was started in September 1994, Knudsen said. The index tracking new export orders rose to 52.7 in January from December's 51.1, Knudsen said.