Severe weather and trade troubles are at the root of an economic slowdown in Iowa and eight other states according to a monthly survey of Midwestern business leaders.
Creighton University economist Ernie Goss says Iowa’s economy sank further below “growth neutral” for the second month in a row, while the Midwest region is doing slightly better overall, but not by much.
“This is the second straight month of decline but it is still the 30th month the index has been above growth neutral,” Goss says. “It is good news but it has been better and I’m expecting positive but slower growth in the weeks and months ahead.”
Iowa, Nebraska, North Dakota and Oklahoma all recorded overall indices below growth neutral for the month of May. He says there are dueling reasons for the declines.
“Two really important factors, both negative, is the floods, the negative impact of flooding in this part of the country, and secondly, the trade impacts,” Goss says. “That would be tariffs and trade restrictions.”
The widespread record flooding, especially in western Iowa, stymied manufacturing activity in the state for the month, Goss says, while large portions of Interstate 29 were closed contributing to the May slowdown. Inflation numbers fell for the month of May, which Goss says he was not expecting, given all that’s happening in the economy.
“They’re down, believe it or not, even with higher tariffs and that’s surprising,” Goss says. “What that’s doing, the Federal Reserve’s next move is to be to reduce interest rates. Of course, that’s good for borrowers but it’s a signal this economy is slowing down.” The way we’re headed, he predicts we could see a recession by the first quarter of 2020.
The survey found almost two-thirds of manufacturers indicated trade skirmishes were making it more difficult to purchase from abroad, while almost one-fourth of supply managers reported ordering early to avoid expanding tariffs. Also, one in eight manufacturers reported switching suppliers to avoid tariffs.