Iowa Business Council’s Economic Outlook Signals Mixed Prospects for Consumers

Iowa Business Council

DES MOINES, IA – The Iowa Business Council (IBC) recently released its second-quarter Economic Outlook Survey (EOS) for 2024, shedding light on the state’s economic trajectory for the next six months. While the overall sentiment remains positive, the report reveals notable declines across key economic indicators, which could have significant implications for Iowa consumers.

The survey, which gauges expectations among IBC members for sales, capital spending, and employment, recorded an overall economic outlook index of 55.26. Although still above the 50-point threshold indicating positive sentiment, this figure marks a drop of 7.9 points from the previous quarter and falls 5.17 points below the historical average of 60.43.

Impact on Consumer Spending and Prices

The decline in sales expectations, which fell by 9.21 points to 57.89, suggests that businesses anticipate slower growth in consumer spending. This could translate to more cautious spending habits among Iowans, potentially curbing the robust consumption patterns seen in previous quarters. Consumers may experience fewer promotional offers and discounts as companies adjust their strategies to maintain profitability amid softer sales forecasts.

Furthermore, the dip in capital spending expectations, also down by 9.21 points to 53.95, indicates that businesses might scale back on investments in new projects and infrastructure. This reduction could slow the introduction of new products and services, thereby limiting consumer choices in the short term.

Employment Prospects and Wage Growth

The survey’s findings on employment expectations, which decreased by 5.26 points to 53.95, suggest that hiring may not be as aggressive as in prior periods. For job seekers, this could mean fewer opportunities and potentially more competition for available positions. However, it is worth noting that despite these declines, the outlook remains cautiously optimistic, indicating that hiring will continue, albeit at a slower pace.

Phil Jasper, President of Raytheon and Chair of the Iowa Business Council, noted, “While IBC members continue to view Iowa’s economy in a positive light, we are clear-eyed with respect to the persistent challenges facing our companies. Whether that be navigating stressed supply chains, continued workforce shortages, or combatting inflation, Iowa companies are not immune to challenges on a national scale and that sentiment is reflected in the latest survey results.”

Challenges Ahead for Workforce and Business Environment

Workforce attraction and retention remain a significant concern for businesses, with 63% of surveyed IBC executives listing it as a primary challenge. This ongoing issue may result in businesses offering higher wages or better benefits to attract talent, potentially driving up operational costs. Consumers might see these costs passed down through higher prices for goods and services.

Additionally, 47% of IBC executives highlighted an unfavorable business climate—encompassing national supply chain disruptions, infrastructure issues, and federal regulations—as a pressing concern. These factors could contribute to longer wait times for products, potential shortages, and increased prices, affecting consumer satisfaction and purchasing power.

Inflation and growing concerns about the domestic economy, cited by 32% of executives, further complicate the landscape. As inflation persists, consumers may face higher costs for everyday essentials, from groceries to gasoline, straining household budgets.

A Silver Lining in Workforce Dynamics

Despite these challenges, there is a slight improvement in the ease of hiring, with 68% of executives now finding it somewhat to very difficult to hire employees, down from 85% in the previous quarter. This improvement could signal better job prospects for those entering the workforce or seeking new opportunities, potentially leading to increased consumer confidence and spending.

Joe Murphy, IBC President, remains optimistic, stating, “Despite decreases across all three surveyed metrics, the IBC retains a positive outlook for Iowa’s economy. As they always have, Iowa’s leading companies continue to skillfully navigate a host of challenges while keeping an eye towards future opportunities for investment and expansion in Iowa.”

Looking Ahead

The IBC’s Economic Outlook Survey, conducted quarterly since 2004, serves as a crucial barometer for Iowa’s economic health. As businesses adapt to current challenges, the insights provided by the survey will be instrumental for economic planning and decision-making, impacting consumers statewide.

To review previous Economic Outlook Surveys and gain deeper insights into Iowa’s economic trends, visit www.iowabusinesscouncil.org/news/eos.