Marketplace Today Blog

By John Schmid
Milwaukee Journal Sentinel

An economic turnaround is possible sometime in the course of 2009, a governor of the Federal Reserve Bank said Friday in Fond du Lac.

“The outlook for real economic activity likely will result in production, spending and labor markets being very sluggish in the second half of this year and well into 2009,” said Charles Evans, president of the Federal Reserve Bank of Chicago and member of the national bank’s policy-making board.

“I expect that such activity will then pick up as the housing and financial markets gain headway in working through their problems. Such progress would be signaled by stabilization in construction and improvement in credit flows.”

The central banker, however, cautioned that any forecast these days carries a high degree of uncertainty.

Wisconsin’s manufacturing sector is faring notably better than much of the industrial Midwest that relies on automakers and their suppliers, Evans said.

“Several metropolitan areas in Illinois, Wisconsin and Iowa with machinery intensive manufacturing operations have held up better than in the past,” he said.

The Fed’s Chicago district — one of 12 around the country — includes Iowa and the larger parts of Illinios, Indiana, Michigan and Wisconsin. That region encompasses an unusual concentration of heavy industry, foundries and tool shops. The region produces 30 percent of American-made motor vehicles, more than a third of its steel and more than half of its farm machinery.

While automakers and their suppliers slump, however, “our machinery sector, which builds a host of capital goods, is holding up much better,” said Evans. “We have a ‘tale of two industries’ within the district, with significant stress in many of our automotive-dominated metropolitan areas but also continued prosperity in many of our machinery-concentrated areas.”

The sort of goods made in Wisconsin have found strong export demand, Evans said.

“It largely reflects strong economic growth by our international trading partners that are demanding items we much, such as tractors, construction equipment, medical devises, generators and mining equipment,” he said. “In comparison to the manufacturing sectors in Michigan, Indiana and Ohio, Wisconsin’s [manufacturing] is more concentrated in capital equipment rather than in motor vehicles. Wisconsin is an important producer of machine tools, construction and farm machinery, food processing equipment, electronic control systems and diagnostic medical systems. By historical standards, this deviation is somewhat unusual.”

Evans was speaking at Marian University in Fond du Lac. It was his first major economic address since taking the top Fed post in Chicago 13 months ago.