DES MOINES - All three key indicators the Iowa Business Council tracks to gauge Iowa's economic health have hit new lows, the Des Moines-based council reported Monday.

The first-quarter 2009 Overall Economic Outlook Survey Index, completed with input from 19 corporate council members, including Deere & Co., was 35.3 - down from 43.3 reported in December and 31 points lower than the 66.3 reported a year ago.

The index measures sales, capital spending and employment.

All three were lower.

"I think it's a confirmation that the state's business community isn't immune from things going on on the national and international scene," said Elliott Smith, the council's executive director. "In the first three quarters of 2008, the companies were reporting positive numbers. Then we got the fourth-quarter report, and I think the nature of the economy and the extent of the downturn were becoming more apparent. You're just seeing a confirmation of that."

Sales in the first quarter registered a 38, down 13 points from the fourth quarter and 35 from the first quarter of 2008. Fifty-eight percent of respondents said they expect sales levels to decrease over the next six months, including 21 percent who anticipate substantially lower sales. However, 42 percent of company chief executive officers predicted steady or increased business activity.

Capital spending scored a 31, down 10 points from the fourth quarter and 32 lower than the year-ago report. Thirty-one percent of the council's corporate members expect capital spending levels to be substantially higher (5 percent), higher (5 percent) or remain the same (21 percent) through August. Most respondents - 68 percent - expect capital spending, which includes investments in facilities and equipment, to be lower (42 percent) or substantially lower (26 percent).

The first-quarter employment outlook is 37, one point lower than December and down 26 points from a year ago. Fifty-eight percent of respondents anticipate lower or substantially lower hiring needs for the next six months. However, 42 percent expected no change or higher worker needs.

"Our survey results from the last two quarters reflect the country's current economic health, with negative trends now reaching deeper into Iowa's business environment," Mel Haught, the council's chairman and and president and CEO of Pella Corp., said in a news release. "As the 2009 General Assembly proceeds with its work at the State House, the best strategy to revive and enhance Iowa's economy will be to align the vision of the public and private sectors."

The Legislature has to remove all obstacles that would hinder growth for Iowa companies, Haught said.

"In this period of severe economic downturn, now is not the time to remove incentives or deter initiatives that spur innovative business growth and generate wealth-creating career opportunities for the majority of our workforce," he said. "A skilled and diverse workforce follows opportunity wherever it exists. We need to continue to work to assure that Iowa is always the destination of choice."

Smith said the survey should be read in context.

"You must bear in mind the survey has been only running seven quarters with these sorts of measures," he said. "The first five quarters of this survey with these index numbers were all running fairly comfortably in the positive zone."

Companies in the state have been running lean, restrained operations, which helped to blunt some of the effects of the downturn, Smith said.

"But realities are what they are in terms of markets," he said. "You can't create sales out of thin air. If you customers are in other regions or parts of the world and they're not buying anything, that's going to come home to roost. It's not a reflection of poor management or products and services here in the state, but of a soft market."

The construction industry has been down for awhile; that's now spilling into heavy-equipment business that Deere occupies.

"I think the construction equipment industry thsoe companies that provide products and services for residential and commercial building, have been in this downward trend the longest of any business sector, and you're starting to see some of the heavy-machinery ag companies having a big of a time now," Smith said. "It's not to the point of huge concern; I think maybe some are stepping back and showing a little bit of caution in hiring and product development."

The report could have been worse, Smith said.

"Last year I think these companies did their best to hang on with what they had," he said. "A year ago, we were talking about a quarter of a million workers needed in this state. Certainly, that number has diminished somewhat in the last 12 months, but there still are companies out there having decent years. This isn't an across-the-board indictment of the economy. It's hitting some sectors harder than others."

Contact Jim Offner at (319) 291-1598 or jim.offner@wcfcourier.com.