Midwest's Economic Outlook Brightens

Farmers, steelmakers likely to benefit

By , Staff writer of The Christian Science Monitor

THE winter gloom hanging over the Midwestern economy has given way to a spring of so-so expectations. ``There's a better feeling than there was earlier,'' says Robert Dederick, chief economist for the Northern Trust Company. ``Nobody is talking about explosive growth. [But] there's the expectation that things will keep plugging along.''

The outlook applies not only to the region's manufacturing but also to its agriculture. The US Department of Agriculture predicts that farmers' net cash income will exceed $50 billion, up 2 percent to 4 percent from 1989. And recent rains have buoyed the outlook for farmers in the Great Plains.

``Weatherwise, we are not in as bad a shape as we were even a few weeks ago,'' says Sheldon Stahl, a private consultant in Kansas City, Mo., and former senior economist at the Federal Reserve.

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``The economy continues to surprise most economists, including this one,'' he adds. ``I would not be surprised to see the economy lurch along.''

Last fall, many economists, businessmen, and analysts were concerned about a downturn, particularly in the Midwest's important auto industry.

Now, ``there is a little bit more optimistic view,'' says David Cole, director of the Office for the Study of Automotive Technology at the University of Michigan. He expects this year's sales of cars and trucks to reach 14.5 million - unspectacular but better than the 13 million to 13.5 million some analysts had predicted last fall.

Although sales will remain sluggish the first half of the year, they will rebound in the second half, says Thomas O'Grady, president of Integrated Automotive Resources Inc.

Steelmakers are also looking for a rebound in the second half of this year after a very difficult fall and winter.

Sales shipments have remained good, says Peter Marcus, a steel analyst with PaineWebber. But worldwide, ``there has been an enormous price collapse.''

For example, the spot price for cold-rolled sheet steel in Antwerp, Belgium, peaked at about $560 per metric ton last March and has fallen to below $450 per ton today. The price of Antwerp cold-rolled sheet steel is considered a bellwether for world steel prices.

Christopher Plummer, a steel analyst for the WEFA Group, expects the price to bottom out at perhaps $440 then begin edging up to $475 or more before the end of the year.

This down-and-up pattern has reached into other sectors of the Midwestern economy as well. ``We have had mini-recessions in manufacturing, but they were only mini,'' Mr. Dederick says. And Midwest ``construction seems to be better than in the rest of the country - particularly in Chicago.''

There are even hints that the Midwest's difficult restructuring has proceeded far enough along to allow US producers to beat foreign imports. For example, had US automakers not increased prices this model year, they would have put severe pressure on a few manufacturers importing cars to the United States.

US steel minimills have also become so competitive that for the first time in a period of oversupply they have displaced sales of foreign steel, says Peter Anker, a senior metals analyst with First Boston Corporation.

The problem is that steelmakers' success has more to do with currency fluctuations than with restructuring, Mr. Plummer says. Just staying in the game will require continued huge investments to keep up with the technological revolution taking place in steel, he adds.

Thus, the Midwest's long-term future is uncertain, economists say. Manufacturers will continue to face fierce competition from overseas. Markets and companies will become increasingly internationalized. And while some companies already have rejuvenated themselves and become globally competitive, that has not translated into a rebound for the region as a whole.

``We have been hearing all this stuff about the resurgence of the Midwest - and it isn't there!'' says Morton Marcus, director of the Indiana Business Research Center at Indiana University.

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