The Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, rose above growth neutral for the 22nd straight month.
Overall Index: The Business Conditions Index, which uses the identical methodology as the national ISM and ranges between 0 and 100 with 50.0 representing growth neutral, soared to a very strong 71.3 from February’s healthy reading of 64.0.
“Creighton’s monthly survey results indicate the region continues to add manufacturing activity at a very healthy pace, but with modest job additions. Supply chain disruptions and labor shortages have pushed commodity prices briskly higher,” said Ernie Goss, Ph.D., director of Creighton University’s Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics in the Heider College of Business.
Even with higher economic activity, all suppliers were not optimistic about the economy. As reported by one supply manager, “Expect an economic correction, (i.e. a recession) — a recession due to inflation, Fed tightening money supply, and raising interest rates.”
Employment: Despite healthy growth in monthly economic activity for almost two years, manufacturers in the region have added jobs at a modest pace. That said, the employment index expanded for the second straight month to 60.6 from 56.6 in February. Except for Arkansas, non-farm employment levels for the remaining eight states remain below pre-pandemic levels.
“This month the Creighton survey asked supply managers to project wage gains for 2022. On average, supply managers projected wage growth at less than 3%,” Goss said. “Given the shortage of workers, this restrained increase is surprising.”
Other March comments from supply managers were:
Hard to distinguish between increased demand and panic buying.”
“Inflation will be with us for decades to come assuming we will still have a country left to pass down to our children.”
“The war with Ukraine is distracting our attention from China. I believe China is looking beyond Taiwan.”
Wholesale Prices: The wholesale inflation gauge for the month rocketed to 95.5, its highest level since October of last year and up from February’s 80.5. “Creighton’s monthly survey is tracking the highest and most consistent inflationary pressures at the wholesale level in more than a quarter of a century of conducting the survey,” Goss said.
Said one supply manager: “Inflation is a tax and leads to many negative economic responses. I would expect this to worsen over the next year with little hope that the midterm elections will change the tide.”
“Given current significant inflationary pressures, I expect a rate hike of one-half of one percentage point at the Fed’s next meeting on May 3-4 even though recession signals have grown over the last several months,” Goss said.
According to the U.S. Bureau of Labor Statistics, commodity prices are up approximately 20.3% over the last 12 months with farm products advancing by 24.7%, metal products expanding by 32.9% and fuels soaring by 39.3%.
Confidence: Looking ahead six months, economic optimism, as captured by the March Business Confidence Index, measured a very weak 31.7 but rose from February’s record low of 19.5. “Concerns about the impacts of the Russia-Ukraine war, higher interest rates, soaring inflation and supply chain disruptions combined to push business confidence well below growth neutral,” Goss said.
In terms of 2022 challenges facing their firm, 7 of 10 supply managers ranked supply disruptions a top challenge, 2 of 10 indicated inflation and higher interest rates as the No. 1 challenge and the remaining 1 of 10 reported labor shortages as their firm’s greatest 2022 challenge.
One March supply manager survey participant said, “We are starting to see positive resolutions in supply chain issues with pockets of excess capacity in certain areas.”
Inventories: The regional inventory index, reflecting levels of raw materials and supplies, jumped to 67.2 from February’s 52.4.
Trade: Despite supply chain bottlenecks, regional trade numbers were positive for the month. The new export orders index climbed to 70.6 from February’s 50.0, while the regional import reading rose to 58.7 from 43.3 in February from 50.0 in January.
Other survey components of the March Business Conditions Index were: new orders climbed to 73.4 from 65.0 in February; the production or sales index advanced to 75.0 from 66.7 in February; and the speed of deliveries of raw materials and supplies increased to 80.6 from February’s 79.6. This higher reading indicates an increase in supply chain disruptions and delays.
The Creighton Economic Forecasting Group has conducted the monthly survey of supply managers in nine states since 1994 to produce leading economic indicators of the Mid-America economy. States included in the survey are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.
The forecasting group’s overall index, referred to as the Business Conditions Index, ranges between 0 and 100. An index greater than 50 indicates an expansionary economy over the course of the next three to six months.
The Business Conditions Index is a mathematical average of indices for new orders, production or sales, employment, inventories and delivery lead time. This is the same methodology, used since 1931 by the Institute for Supply Management (ISM), formerly the National Association of Purchasing Management. The Mid-America report is produced independently of the national ISM.
Arkansas: The Business Conditions Index for Arkansas climbed to a strong 74.4 from 59.8 in February. Components from the March survey of supply managers were: new orders at 69.2, production or sales at 78.1, delivery lead time at 86.5, inventories at 75.4 and employment at 62.5. Over the past 12 months, the U.S.
Bureau of Labor Statistics (BLS) recorded that Arkansas’s average hourly manufacturing wages expanded by 1.5%, a regional low, and non-durable goods producers added jobs at the fastest pace among state manufacturers.
Iowa: Iowa’s Business Conditions Index for March rose to 75.6 from 60.6 in February. Components of the overall March index were: new orders at 75.4, production or sales at 72.1, delivery lead time at 87.8, employment at 64.0 and inventories at 78.8. Over the past 12 months, the BLS recorded that Iowa’s average hourly manufacturing wages expanded by 3.7%, eighth highest among the nine states, and agriculture equipment manufacturers led the way in terms of manufacturing job growth in the state.
Kansas: The Kansas Business Conditions Index for March jumped to 72.1 from 62.1 in February. Components of the leading economic indicator from the monthly survey of supply managers for March were: new orders at 74.2, production or sales at 75.5, delivery lead time at 81.8, employment at 66.5 and inventories at 62.5. Over the past 12 months, the BLS recorded that Kansas’ average hourly manufacturing wages expanded by 7.2%, third highest among the nine states, with aerospace equipment manufacturers leading the way in terms of manufacturing job growth in the state.
Minnesota: The March Business Conditions Index for Minnesota dipped to 69.4 from 70.6 in March. Components of the overall March index were: new orders at 73.8, production or sales at 74.5, delivery lead time at 80.0, inventories at 64.1 and employment at 54.8. Over the past 12 months, the BLS recorded that Minnesota average hourly manufacturing wages expanded by 5.7%, sixth highest among the nine states, with metal manufacturers leading the way in terms of manufacturing job growth in the state.
Missouri: The March Business Conditions Index for Missouri expanded to 78.1 from February’s 68.5. Components of the overall index from the survey of supply managers for March were: new orders at 75.8, production or sales at 80.0, delivery lead time at 83.4, inventories at 84.7 and employment at 66.6. Over the past 12 months, the BLS recorded that Missouri average hourly manufacturing wages expanded by 3.9%, seventh highest among the nine states, with computer and electronic parts manufacturers leading the way in terms of manufacturing job growth in the state.
Nebraska: Nebraska’s overall index for March advanced to 69.4 from 63.2 in February. Components of the index from the monthly survey of supply managers for March: new orders at 74.0, production or sales at 75.1, delivery lead time at 81.2, inventories at 60.8 and employment at 56.1. Over the past 12 months, BLS recorded that Nebraska average hourly manufacturing wages expanded by 10.4%, tops among the nine states, with metal manufacturers leading the way in terms of manufacturing job growth in the state.
North Dakota: The March Business Conditions Index for North Dakota climbed and remained above growth neutral at 75.7 from 63.4 in February. Components of the overall index for March were: new orders at 75.1, production or sales at 78.2, delivery lead time at 86.7, employment at 62.7 and inventories at 75.8. Over the past 12 months, BLS recorded that North Dakota average hourly manufacturing wages expanded by 7.0%, fourth among the nine states, with non-durable manufacturers leading the way in terms of manufacturing job growth in the state.
Oklahoma: Oklahoma’s Business Conditions Index expanded above growth neutral in March to 69.7 from February’s 68.1. Components of the overall March index were: new orders at 74.1, production or sales at 75.3, delivery lead time at 81.4, inventories at 61.4 and employment at 56.4. Over the past 12 months, BLS recorded that Oklahoma average hourly manufacturing wages expanded by 6.2%, fifth among the nine states, with food processors leading the way in terms of manufacturing job growth in the state.
South Dakota: The March Business Conditions Index for South Dakota climbed to 56.9 from 50.4 in February. Components of the overall index from the March survey of supply managers in the state were: new orders at 71.8, production or sales at 69.0, delivery lead time at 70.1, inventories at 30.7 and employment at 43.0. Over the past 12 months, BLS recorded that South Dakota’s average hourly manufacturing wages expanded by 9.2%, second among the nine states, with durable manufacturers leading the way in terms manufacturing of job growth.