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World events ripple to Ninth District businesses

April 6, 2011


Joe Mahon Director, Regional Outreach
World events ripple to Ninth District businesses

With the Ninth District square in the middle of the continent, you might think troubles in faraway places—the Japanese disaster, a sovereign debt crisis in Europe, political upheaval in the Middle East and North Africa—would not be a big concern for businesses here. But you would be wrong, at least according to some of those businesses.

The Minneapolis Fed conducted an ad hoc survey in late March asking a variety of business contacts about recent price changes and the impact of world events. Not surprisingly, most of the 158 survey respondents said foreign turmoil hasn’t had a direct effect on them. But a fair share of those surveyed did feel the ripples of these distant events. The responses to the survey are summarized in the following table.

 World issues table -- 4-5-11

 When the results are broken down by what sector the respondents come from, interesting details emerge. For example, while two-thirds of overall respondents said the Japanese disaster had no effect on their business, 41 percent of manufacturers said it had an unfavorable impact, while nearly 14 percent saw favorable effects for their operations. Forty-four percent of wholesalers said the impact was somewhat or very unfavorable. As you might expect, the services and construction sectors were less affected.

Overall, European debt woes had the least impact on regional businesses. However, they were more of a concern for the finance industry, where a quarter of respondents said the effect was unfavorable.

The political turmoil in the Arab and Muslim world was the biggest international concern for district businesses, especially for manufacturing and construction, in which almost half of survey takers said the impact was negative. Going by the comments, the primary threat was increased oil prices.

The survey also asked about recent price changes. Nonlabor input prices increased for 53 percent of respondents, compared with 47 percent of respondents to the same question asked in early February. But that increase hasn’t passed through as much to customers. Only 25 percent of respondents said they have increased the prices they charge, down from 29 percent in the previous survey.

Joe Mahon
Director, Regional Outreach

Joe Mahon is a Minneapolis Fed regional outreach director. Joe’s primary responsibilities involve tracking several sectors of the Ninth District economy, including agriculture, manufacturing, energy, and mining.