Drought Causing Drain on Economy

A survey that was recently released has provided suggestion that the current drought and a decline in export demand is part of the reason that the economy is currently dealing with such a drain in different areas of the United States, particularly the states in the Midwest. An economist at Creighton University, Ernie Gross, has said, “Supply managers’ report that drought conditions, U.S. economic uncertainty and slowing global demand are restraining growth.” Gross also said, “However, the index would have to drop into the low 40s before I would anticipate a return to recessionary economic conditions.” The survey is conducted on a number of supply managers as well as business leaders and uses an index rating of anywhere from 0 to 100. A score that is above the 50 range suggests that growth has taken place while anything under 50 suggests that a decline has occurred.  The survey is conducted on a number of different states, including Kansas, North Dakota, South Dakota, Oklahoma, and Arkansas.

The business confidence index for the month of August has provided indication that people are beginning to feel slightly more optimistic about the current economic situation. The percentage of optimism increased from 38.0 percent during the month of July to 44.3 percent during the month of August. In the state of Arkansas, the index declined from 52.4 percent during July to 51.2 percent for the month of August. Goss said, “Our surveys over the past several months show a state economy that is likely to continue to expand, but at a pace that will create few jobs, leaving the unemployment rate little changed from its current level.” He also said, “I expect Arkansas to end the year with employment down by approximately 40,000 (jobs), or 3.5 percent, from its pre-recession level.”

In the meantime, the index in the state of Iowa dropped from 62.1 percent to 57.1 percent during the month of August. There were several components for the index, including the amount of new orders and productions and sales. Gross said, “While the full impact of the drought has yet to weigh heavily on Iowa’s economy, I expect that to change in the months ahead as businesses linked to agriculture experience a downturn in sales. I expect Iowa to end the year still down almost 32,000 jobs, or 2.1 percent, from its pre-recession level.” The state of Kansas and Minnesota managed to see an increase for the overall index. Even though Minnesota managed to see an increase, it will still quite weak. Gross said, “Minnesota’s economic and job growth were strong for the first half of 2012. Despite solid gains the state is still down approximately 60,000 jobs, or 2.2 percent, from its pre-recession level.”