The latest Business Conditions Index that focuses on nine Midwestern states shows the region’s economies expanded during March as Iowa saw its third consecutive month of growth. Ernie Goss, an economics professor at Creighton University, compiles the report and says March was Iowa’s best month since July of 2007. For the Midwest as a whole, Goss says there’s good and bad news.
"The good news for the region, the overall number bounced above growth neutral pointing to pretty good growth in the months ahead although down from this time last year," Goss says, "on the flip side, the bad news is there is a heck of a lot of inflationary pressures out there. Our inflation gauge rose to a record level, the highest level we’ve recorded since we began this survey in 1994."
Goss says consumers are paying more at the gas pump and in the grocery store. Employment could be an issue in the months ahead and he says the mortgage banking situation isn’t helping. Goss says the housing downturn hasn’t bottomed out yet and the stress will continue, though he says the problems with falling home prices aren’t as bad here in the Midwest as in other parts of the country.
With more than 20% of the nation’s ethanol plants and 19% of U.S. corn production, Goss says Iowa has been a big economic winner from the growth in corn-based ethanol production, which he says is an important component in the recent upturns. Still, Goss says people may need to make some adjustments in their day-to-day living habits due to inflation.
"Individuals, families, consumers are going to have to tighten their belts with much higher inflation, with the real key being higher energy prices, higher gasoline prices and higher food prices," Goss says. "That’s really cutting into what consumers have to spend for non-discretionary items. For example, restaurants will have a little bit of tougher go of it as business travelers pull back, as individuals and families pull back on what they spend outside the home for food."
Goss says the good news for the Midwest is that there is less fallout from the downturn in the housing market and record farm income due to high commodity prices. He says there is a big gap between the mid-America economy and the U.S. economy as a whole.