The Associated Press November 1, 2011, 10:18AM ET

Midwest economic survey takes negative turn

For the first time in nearly two years, the overall Business Conditions Index for a nine-state region of the Midwest and Plains has taken a negative turn.

A report released Tuesday on the survey of supply managers and executives said the index dropped to 49.9 in October, from 52.2 in September.

The survey uses a collection of indexes ranging from zero to 100. Organizers have said that any survey score above 50 suggests growth while a score below 50 suggests decline for that factor.

Creighton University economics professor Ernie Goss, who oversees the survey, said one reading slightly below a growth-neutral 50 doesn't signal a recession.

"But if the index continues to weaken in the months ahead, the likelihood of a return to recessionary economic conditions becomes a real possibility for 2012," said Goss, who heads the university's Economic Forecasting Group. "It is evident that the weakness in the national economy has now hit the regional economy," he said.

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

One of the brighter spots in the survey was the confidence index, which looks six months ahead. It rose to a still weak 49.5 in October from 40.5 in September.

The prices-paid index, which tracks the cost of raw materials and supplies, dropped to 56 from September's 66.3.

"This is the lowest reading for our inflation gauge that we have recorded since June 2009, the last month of the recession," Goss said. "Lower inflation in the pipeline will give the Federal Reserve more flexibility to further stimulate the economy."

Other components of the October index:

-- New orders dropped to 45.4 from 49.6 in September.

-- Production or sales dropped to 48.5 from 50.4.

-- Employment dipped to 49 from 49.6.

-- Trade rose to 48 from 45.5.

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Online:

Creighton Economic Forecasting Group: http://www.outlook-economic.com


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