The state economy has slowed to a level that could signal an approaching recession, according to the Iowa Department of Revenue. The Iowa Leading Indicators Index dipped to 107.3 in January, the fourth consecutive decline in the index, with three of eight components showing gains for the month.

The annualized six-month change decreased to -1.9 percent in January from a revised -0.6 percent in December, marking the fifth time in the last six months that the annualized six-month change registered in the negative.

The January dip moves the changes close to the 2 percent level estimated to be a recessionary signal, the revenue department said.

The six-month diffusion index decreased to 12.5 in January from 25 in December, with just one of eight indicators — diesel fuel consumption — registering an increase of more than 0.5 percent over the last six months.

Though Iowa’s nonfarm employment index has measured 15 consecutive months of positive growth, the negative annualized six-month leading indicators value and the six-month diffusion index at 12.5 suggest that signals of weakness in the Iowa economy are deepening and are broad-based, the revenue department said. 

The January report suggests that in three to six months, employment growth will weaken and possibly stall.

Farm commodity prices and building activity continued to be a drag on the index in January.

The agriculture future prices index was in negative territory for the seventh time in the last 12 months. Compared with last year, new-crop soybean prices were 4 percent lower while corn prices were 7.4 percent higher; however, corn break-even prices were 13.6 percent higher, pushing down expected profits. The January crush margin for hogs was down 3.5 percent while the crush margin for cattle was down 0.6 percent from December.

Residential building permits were 7.4 percent below January 2018 and 8.7 percent below the historical average for the month.

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