The Midwest's Economy's Mixed Messages

The Midwest economy is stuck seemingly somewhere between declining short-term struggles and positive long-term trends. The result is an economic environment that is much like preparing for a NASA space launch that has been scrapped for several days in a row because of bad weather.

A recent report from the Creighton University Mid-America Business Conditions Index, a monthly survey of the business conditions of nine Midwestern states, showed business owners are growing pessimistic about economic conditions. Business owners surveyed in July are becoming concerned about the continuing strong dollar and its potential impact on export markets. This is of special concern to manufacturers who are looking to sell their increasingly more expensive products to overseas markets while having to compete against international competitors chipping away at their market share domestically with import products that are becoming relatively less expensive.

Wholesale inflation is also becoming a concern, as raw material and supply prices are increasing at a pace that experts feel may push the Federal Reserve to bump interest rates up yet this year, increasing borrowing costs.

The short-term employment also looks weak, with those surveyed expecting employment growth to remain slightly worse than neutral. Manufacturing and agriculture sectors are the most susceptible as commodity prices have continued to remain low, discouraging farmers from investing in new equipment.

However, there is light at the end of the tunnel.  A recent survey of housing experts indicates that the lower cost of living in the Midwest is drawing companies to relocate or expand businesses from the coasts. In fact, Dr. Svenja Gudell, the Chief Economist from real estate marketplace company Zillow believes that if workers follow that trend it could provide a spark in the Midwestern economy.

New businesses and employers moving into the Midwest will ultimately impact many segments of the area’s economy – from housing and retail sales to infrastructure investment from local and state governments. How quickly this happens will ultimately impact how long the Midwest economy will live in its current state of confusion.