In the Creighton report, which surveys manufacturers and business leaders in Utah, Colorado and Wyoming, the overall business conditions index for the region for March fell to 73.9 from February's 75.2. Colorado's overall index climbed to 80.6 from February's 70.0, while Wyoming's declined to 82.1 from February's 93.2.

"Higher short-term interest rates and energy prices have failed to slow the regional economy to any degree as supply managers and business leaders reported robust growth for March," Creighton economics professor Ernie Goss wrote in the report.

Looking ahead, the Creighton report indicates that local and regional manufacturers are optimistic. Its business confidence index, which tracks survey participants' economic outlook six months out, stood at 85.7, down slightly from February's 86.4.

However, John Silvia, chief economist with Wachovia Corp., said it is unclear how long manufacturers can continue to absorb increases in their costs without raising their prices. That creates inflationary pressure, meaning the Fed is unlikely to back away from raising interest rates again in May, Silvia said.

Goss agreed.

"Survey participants are more optimistic than I am regarding growth in the last half of 2006," he wrote. "The 15 Fed rate hikes and higher energy prices have failed to put a dent in supply managers' expected growth for the second half of 2006.

"In January I placed the likelihood of a Federal Reserve rate hike in May at less than 10 percent. I now set the probability of at least a quarter point increase at 90 percent when the Fed meets again on May 10."

---

E-mail: jnii@desnews.com