Midwest Industry Hit by Recession

Various international tempests and other factors, such as uncertainty over the price of oil, seemed to drive the markets down Monday, but only slightly. The Dow Jones index ended 31.62 points down, or 0.37 percent, while the S&P 500 was off 0.39 percent and the Nasdaq was down more–1.3 percent. According to the Chicago Federal Reserve Bank, manufacturing in the Midwest is at its most sluggish pace in more than a decade (the Midwest in this case being Illinois, Indiana, Iowa, Michigan and Wisconsin, which form the seventh Federal Reserve district). In November, the Chicago Fed’s Midwest factory index stood at a seasonally adjusted 96.4, down from 98.0 in October. The index reflects manufacturing activity in the region, with the year 2002 equaling 100 on its scale. Compared with the same month last year, the manufacturing slowdown is especially dramatic–little surprise here–in the auto industry, which is down 24 points, compared with a decline for the entire index for the same period of 10.8 points. Among property types, the industrial slowdown will most likely affect warehouse/distribution space directly, as demand for parts and other goods feeding the manufacturing process dries up. The roiling of distribution and logistics is sending industrial real estate owners and developers scrambling, such as when industrial property giant ProLogis suspended its new development pipeline last month. Shipping Digest reports that manufacturers and retailers are forming crisis-management teams “not only to cope with their own suddenly dimming financial picture, but those of their transportation and logistics partners as well… companies are racing to lock in financing and operating capacity as the economy deteriorates.” Right after Christmas, Statistics Canada, the government agency that keeps track of the Canadian economy, announced that Canada’s GDP was down 0.1 percent in October compared with the month before. The downward movement is relatively slight when compared to the country’s neighbor to the south, but does point to a softening even of the Canadian economy, which has proven more resilient than the U.S. or other industrialized economies recently. Much of the decline is probably attributable to the fact that the United States is the largest market for Canadian goods. The most significant drop in Canadian output during October was in wholesale trade (down 0.2 percent) and manufacturing (down 0.7 percent), according to Statistics Canada. “Our markets are closely aligned with the U.S. market,” Sandra Pupatello, Ontario’s Minister of International Trade and Investment, told CPN recently, adding that the country’s economy nevertheless has considerable strengths. “Canada is ranked by the IMF as having the most stable financial system in the world. Long-term that will be good for Canada, but that doesn’t mean that next year won’t be tough.” In fact, the minister adds, despite the recession in the United States and economic weakness in Canada, both U.S. and Canadian companies are still interested in cross-border investment in each other’s countries, with a particularly strong connection between the industrial U.S. heartland of the Midwest and the center of Canadian industry, Ontario. “The downturn won’t last forever,” she said. “This is the time to investigate opportunities for the long run.”