The July edition of the Mid-America Business Conditions Index from Creighton University remains above growth neutral, but has dropped to lowest level in 42 months.

“Business investment, particularly on inventories is coming down and that slows growth,” said Creighton economist Ernie Goss. “Also, of course, net exports are not good. They’re more negative. That’s dragging growth down. The Federal Reserve saw that just yesterday, reducing rates by a quarter-percent.”

The good news from Federal Reserve Chair Jerome Powell wasn’t quite good enough.

“He said this is a midterm correction, indicating maybe it’s not the first among many, maybe it’s the first and last,” said Goss. “That’s what the market did not like. The market had at least baked in several rate cuts. I still think there will be a rate cut in September.”

Though domestic consumer spending is strong, Goss notes the need of the midwest, particularly Kansas, to see movement in trade.

Kansas depends heavily on trade, in terms of aircraft and aircraft components as well as agriculture,” said Goss. “We’ve got the USMCA, that’s NAFTA 2.0, which is still before Congress, has not been passed by Congress and put on the President’s desk. That creates uncertainty and always, uncertainty pushes the economy to a lower level of growth.”

The Kansas Business Conditions Index for July sank to 52.1 from June’s regional high of 62.9.