The February Creighton University Mid-America Business Conditions Index, a leading economic indicator for a nine-state region stretching from Minnesota to Arkansas, sank for the month, but remained above growth-neutral.

Iowa’s overall index has climbed above the growth-neutral threshold for the last three months, with a February reading of 53.1, down from 55.7 in January. 

This is the third straight month the overall reading has remained above growth-neutral 50.0. The Business Conditions Index, which ranges between 0 and 100, tumbled to 52.8 from January’s 57.2, its highest level since March 2019.

“This month’s softer reading plus the mounting negative impacts from the coronavirus should concern policymakers regarding the strength of the economy,” said Ernie Goss, director of Creighton University’s Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics in the Heider College of Business. “Fully 40% of supply managers reported negative impacts from the coronavirus. The coronavirus forced 27% of firms to cease, or reduce international buying.” 

One supply manager said, “The coronavirus has caused us to dual source, but not everything is domestic and China. Most are India and China.”

Components of the overall Iowa index from the monthly survey of supply managers were new orders at 59.9, production or sales at 54.0, delivery lead time at 52.3, employment at 51.3 and inventories at 48.1. “Over the last 12 months, Iowa manufacturing employment growth ranked number four in the nine-state region expanding by 0.2%, while state manufacturing wage growth ranked number nine in the region, growing by 2.9%,” Goss said.

The February employment index declined to 46.4 from January’s 53.8. For February, trade constraints, a lack of available workers, and the coronavirus produced job losses for the manufacturing sector of the regional economy.

“Over the past 12 months, due to the shortage of workers, regional manufacturing job growth was minus 0.1% compared to much stronger 0.5% for U.S. manufacturing job gains. The shortage of workers did, however, as expected, serve to push average hourly wage growth up by 4.5% compared to a lower 2.9% for the U.S. manufacturing sector over the same 12-month period,” said Goss.

Read more about the index.