Creighton’s regional Business Conditions Index climbed into a range indicating solid manufacturing growth. Despite supply chain bottlenecks and the strong dollar, regional exports were healthy for July.
The regional inflation gauge continues to indicate excessive inflationary pressures at the wholesale level. Confidence indices for all of 2022, all below growth neutral, are the worst recorded since the 2008-09 recession.
On average, supply managers expect their prices to climb by 7.4% during the next year, which is down from their 7.7% projection last year at this time.
On average, manufacturing supply managers expect a raise of only 3.5% for the next 12 months.
The Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching including Kansas, rose above growth neutral for the 26th straight month.
The Business Conditions Index, which uses the identical methodology as the national Institute for Supply Management (ISM), rose in July from June's mark. The Mid-America report is produced independently from the national ISM.
“Creighton’s monthly survey results indicate the region continues to add manufacturing activity at a solid pace, but with significant inflationary pressures ahead. Supply chain disruptions eased further in July, according to supply managers,” said Ernie Goss, PhD, 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 solid economic activity, supply managers were very pessimistic about the economy. As reported by one supply manager, there are “relatively new concerns with eminent recession and the impacts.”
Despite healthy growth in monthly economic activity for almost two years, manufacturers in the region have added jobs at only a modest pace. That said, the employment index rose above growth neutral for the seventh straight month, although July's mark was down from June. Except for Arkansas and South Dakota, non-farm employment levels, seasonally adjusted, remain below pre-pandemic levels for all states in the region.
“Creighton’s monthly survey continues to track the highest and most consistent inflationary pressures at the wholesale level in more than a quarter of a century of conducting the survey,” said Goss.
This month, supply managers projected price increases for their firms’ prices. On average, supply managers expect their prices to climb by 7.4% over the next 12 months, which is down from their 7.7% projection last year at this time,” said Goss.
According to the U.S. Bureau of Labor Statistics, commodity prices are up approximately 23.4% over the last 12 months with farm products advancing by 26.7%, metal products expanding by 15.6% and fuels soaring by 69.0% during this same time period.
“Given current significant inflationary pressures, I expect a rate hike of 0.50% at the Federal Reserve’s interest rate setting committee meeting September 20-21, despite two consecutive declines in quarterly gross domestic product. Inflationary pressures remain too high for anything less,” said Goss.
Looking ahead six months, economic optimism as captured by the July Business Confidence Index, increased in June from very weak numbers. “Confidence indices for 2022, all below growth neutral, are the worst recorded since the 2008-09 recession,” said Goss.
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 include Kansas, Oklahoma, Missouri, Nebraska, Arkansas, Iowa, Minnesota, North Dakota, and South Dakota.
“Durable goods producers, including machinery manufacturers, are reporting solid growth, but with current employment (SA) below pre-pandemic levels. Non-durable goods producers, including food processors, are reporting healthy growth with current employment (SA) exceeding pre-pandemic levels,” said Goss.