State economy slips, but still positive - The confidence of business leaders remains high, a study shows

A leading economic gauge for Oklahoma edged downward for the final month of the year, but still pointed to growth in the months ahead, according to a report released Tuesday by Creighton University in Omaha, Neb.

Also, the state's confidence index remained the highest in the region.

Oklahoma's Business Conditions Index ended the year at 54.8, which still was a healthy reading, even though it was down from November's 58.8.

The overall index ranges between 0 and 100. An index greater than 50 indicates an expansionary economy over the next three to six months.

"Oklahoma's numbers are reasonably strong," said Ernie Goss, a Creighton University economics professor, in a phone interview.

Once again, Oklahoma's confidence index of 66.7, which was below 75.0 in November, remained the highest in the region, he said.

The confidence index for the nine-state region, by contrast, was 47.3, which was its lowest since Hurricane Katrina pushed the outlook gauge to 45.5 in October 2005, Goss said in his report.

Other individual components of the Oklahoma's overall index also showed drops in December.

--New orders fell to 66.7, down from 75.0.

--Production, a measure of current output, likewise dropped to 61.1, down from 62.5.

--Inventories also retreated to 50.0, down from 56.3

--Employment rose to 44.4, up from 37.5 the month before.

Goss said he was disappointed to see Oklahoma's employment index below 50, but given the strength of the other index numbers, such as new orders, it was less of a concern.

Anything related to automobiles, including motor vehicles parts and tire production, is not doing well in the region or Oklahoma, Goss said.

Despite losses in vehicle manufacturing and related jobs, Oklahoma gained approximately 1,600 manufacturing jobs in November compared with the same month a year ago, for an over-the-year growth of 1.1 percent.

Goss expects auto-related industries in Oklahoma will continue to experience weakness this year while the oil services industry will have a solid first half in 2007. One Oklahoman in heavy manufacturing surveyed for the index noted that there are still a lot of surcharges on stainless steel, zinc plating, fuel and energy charges.

"Construction has held up pretty strong in Oklahoma, stronger than the rest of the region," he said.

Goss said he is a little concerned about the downturn in the housing sector in the region. Despite high inventories, many builders are still building as banks continue to lend them money. But instead of building homes priced at between $500,000 to $700,000, they might build homes ranging between $100,000 to $200,000, he said.

"You've got some issues there with residential construction, which I don't think are ironed out. In the metro areas like Tulsa and Oklahoma City, you've got issues in the condominium market," said Goss, noting that people might see some condos being converted to apartments.