OMAHA, Neb. (July 1, 2021) – Since declining to a record low in April of last year, the Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, moved above growth neutral for 13 of the last 14 months.
Overall Index: The Business Conditions Index, which uses the identical methodology as the national ISM, ranges between 0 and 100, climbed to a very strong 73.5 from May’s 72.3. However, as in previous months, manufacturing supply managers report that labor shortages and supply bottlenecks continue to restrain growth.
Nine of 10 supply managers reported increases in supply bottlenecks, or delays, for June.
“Creighton’s monthly survey results indicate that the region is adding manufacturing business activity at a very healthy pace, and that growth will remain strong with the overall regional economy returning to pre-pandemic levels in the first quarter of 2022,” 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.
Employment: The regional employment index remained above growth neutral for June, rising to 61.7 from 55.6 for May. “In terms of ranking, supply managers listed worker shortage as the third most significant 2021 business challenge. Despite the shortage, one-third of companies reported upturns in hiring for the month,” said Goss.
“The shortage of production workers continues to push wages higher. U.S. Bureau of Labor Statistics data indicate that average hourly earnings of manufacturing production workers in the region expanded by 4.9% over the past 12 months,” said Goss.
Other comments from June survey participants:
• “Our biggest hurdle is lack of people to hire and supply chain interruptions in steel, plastics components for assemblies that come from outside of the US.”
• “Worker shortage; causing supply shortage; causing unprecedented inflationary surge.”
• “Steel or raw material prices rising, and lack of availability are impacting our ability to supply parts to our customers….and it seems to be getting worse, not better.”
• “The Biden Administration has overdelivered on their promise to make drastic changes to our nation-Illegal Immigration and inflation.”
Wholesale Prices: The wholesale inflation gauge for the month surged to a record high 98.4 from May’s 96.3, also a record high.
“At the wholesale level, Creighton’s survey is tracking higher and higher inflationary pressures. Commodity prices are up approximately 12% for the first five months of 2021 according to U.S. Bureau of Labor Statistics data. Supply managers in Creighton’s June survey expect prices for their firm’s products to advance by 8.6% (annualized) for the rest of 2021,” said Goss.
In terms of 2021 business challenges, manufacturing supply managers identified rapidly rising input prices as their firm’s second greatest 2021 economic challenge, behind only supply bottlenecks as their top challenge.
Confidence: Looking ahead six months, economic optimism, as captured by the June Business Confidence Index, fell to a healthy 60.8 from May’s strong 88.6.
“Despite supply bottlenecks, rapidly rising prices and labor shortages the expanding regional economy pushed economic confidence among manufacturing supply managers higher for the month,” said Goss.
Inventories: The regional inventory index, reflecting levels of raw materials and supplies, fell to 67.9 from last month’s 72.0.
Trade: Despite supply chain bottlenecks, regional trade numbers were solid for the month. The new export orders index sank to a very healthy 72.2 from May’s 76.5. An expanding domestic manufacturing sector underpinned June’s import reading of 52.4, which was down from May’s 55.0.
Other survey components of the June Business Conditions Index were: new orders increased to 75.9 from 75.0 in May; the production or sales index expanded to a very strong 78.4 from May’s 68.5; and the index for the speed of deliveries of raw materials and supplies fell to 83.9 from May’s record high of 90.8. A higher reading indicates slower deliveries.
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 June Business Conditions Index for South Dakota fell to 74.0 from 75.5 in May. Components of the overall index from the June survey of supply managers in the state were: new orders at 75.1, production or sales at 77.3, delivery lead time at 86.1, inventories at 73.8, and employment at 57.8. “According to U.S. Bureau of Labor Statistics, average hourly wages for manufacturing production workers in South Dakota rose 1.2% over the past 12 months. Among the nine Mid-America states, this growth ranked fifth,” said Goss.
Survey results for July will be released on Aug. 2, 2021, the first business day of the month.
