OMAHA, Neb. (May 2, 2022) – 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 23rd straight month.
Overall Index: The Business Conditions Index, which uses the identical methodology as the national Institute for Supply Management (ISM) and ranges between 0 and 100 with 50.0 representing growth neutral, sank to a still healthy 65.9 from March’s very strong 71.3.
“Creighton’s monthly survey results indicate the region continues to add manufacturing activity at a healthy pace but with significant inflationary pressures. Supply chain disruptions and labor shortages remain as chief challenges for firms in the region,” 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, all suppliers were not optimistic about the economy. As reported by one supply manager, “Europe is suffering from the war in Ukraine. Some paper mills have incurred (significant) down-time due to lack of raw materials. I believe it will get much worse.”
Approximately four of ten supply managers expect supply chain disruptions to worsen, while only two of ten anticipate an improvement in these disruptions.
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 third straight month to 62.1 from 60.6 in March. Except for Arkansas and South Dakota, non-farm employment levels remain below pre-pandemic levels for states in the region.
Other April comments from supply managers were:
- “Energy costs have got to come down.”
- “Unfortunately, we didn’t have the data or use it to our advantage when we should have to better lock in materials and ensure supply chain continuity.”
- “All of this could have been avoided with a conservative vote back in 2020.”
- “Due to extreme tightness of supply, some suppliers were extremely aggressive in raising prices to maximize profits.”
- “As the economy cools down in the coming months, non-strategic suppliers will lose market share due to their poor performance throughout the tight market.”
Wholesale Prices: The wholesale inflation gauge for the month declined to a still high 89.7 from March’s supercharged 95.5. “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,” Goss said.
More than half of survey participants, or 56.7%, reported that the rising costs of materials for suppliers was the prime factor pushing input prices higher. Approximately 13.5% named transportation delays as the prime factor driving input prices higher, while only 10.0% and 6.7% identified higher fuel energy prices and labor costs, respectively, as factors pushing input prices higher.
The remaining 13.1% named other factors, such as supplier profits, as causes of higher input prices.
“Given current significant inflationary pressures, I expect a rate hike of one-half of one percentage point at each of the Fed’s next two rate setting committee meetings, May 3-4 and June 14-15, even as 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 20.5% over the last 12 months with farm products advancing by 34.0%, metal products expanding by 28.9% and fuels soaring by 40.0%.
Confidence: Looking ahead six months, economic optimism as captured by the April Business Confidence Index, rose to a very weak 33.4 from 31.7 in March. “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.
Inventories: The regional inventory index, reflecting levels of raw materials and supplies, fell to 60.3 from March’s 67.2.
Trade: Despite supply chain bottlenecks, regional trade numbers were positive for the month. The new export orders index stood at 61.6, down from March’s 70.6, while the regional import reading rose to 59.5 from 58.7 in March.
Other survey components of the April Business Conditions Index were: new orders sank to 71.5 from 73.4 in March; the production or sales index fell to 63.8 from 75.0 in March; and the speed of deliveries of raw materials and supplies declined to 71.7 from March’s 80.6. This lower reading indicates a reduction 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.
South Dakota: The April Business Conditions Index for South Dakota slipped to 55.2 from 56.9 in March. Components of the overall index from the April survey of supply managers in the state were: new orders at 68.1, production or sales at 58.7, delivery lead time at 63.0, inventories at 35.5 and employment at 50.6. For 2022, non-durable goods producers in the state have expanded, while durable goods producers have added little in terms of jobs and economic activity. Over the past 12 months, BLS recorded that South Dakota’s average hourly manufacturing wages expanded by 5.6%, below the regional median of 6.4%.
Survey results for May will be released on June 1, 2022, the first business day of the month.
