Mid-American Economy

Mid-America Manufacturing Weak:
Higher Inflation and Fewer New Hires

 March 2024 Survey Highlights:

• For the fourth straight month, the overall, or Business Conditions Index, hovered around growth neutral. 
• The region’s manufacturing sector lost jobs for a third straight month. 
• The wholesale price climbed to its highest level in more than a year. 
• Over the past 12 months, the number of job openings for each unemployed worker was 2.1.  This is down from 2.5 recorded 12 months earlier.
• Approximately 68% of supply managers expect a 2024 economic recession.
 

OMAHA, Neb. (April 1, 2024) — After climbing slightly above growth neutral for December and January, the Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, slumped below the 50.0 growth neutral threshold for February and March. 

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, increased to 49.6 from 49.1 in February.

“The overall index, much like the U.S. reading, has hovered around growth neutral for the last four months. Additionally, supply managers remained pessimistic regarding the 2024 outlook with approximately 68% expecting a 2024 economic recession,” 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. 

The Mid-America report is produced independently of the national ISM.

Employment: After climbing to growth neutral for December, the employment gauge has tumbled below 50.0 for the past three months. The March employment index fell to 40.9 from February’s 42.9. “Over the past 12 months, according to the latest monthly U.S. Bureau of Labor Statistics data, the number of job openings for each unemployed worker was 2.1. This is down from 2.5 recorded 12 months earlier,” said Goss.

“Despite labor shortages and elevated inflationary pressures, only 13.3% of hiring manufacturers reported boosting entry level wages above the rate of inflation,” said Goss.

Other March comments from supply managers were:

• “We have been slow for 3-4 months. We have lots of quotes and projects, but the orders are not coming in.”
• “Our industry has seen a slowdown in sales for the first quarter of the year. This is expected to continue until the Fed takes action on interest rates.”
• “A lot of uncertainty in our market. Suppliers raising prices in unison in a weak, excess capacity and inventory market. Expect the pricing will correct downward.  Not sure how long it will take.”
• “We are starting to have customers push out demand – not necessarily cancel orders but push out 2-5 months.”
• “Inflation is the government tax that does not need Congress – not that I believe Congress does anything but spend money and waste time and straight out lie.”
• “It's going to get tougher before it gets better.”

Wholesale Prices: The wholesale inflation gauge for the month rose to 77.3 from 61.9 in February, indicating expanding inflationary pressures. “March’s inflation reading is the highest recorded since February 2023. With the wholesale price index elevated in Creighton’s survey and the U.S., I do not expect a Federal Reserve rate cut until July 30/31 of this year,” said Goss. 

Confidence: Looking ahead six months, economic optimism as captured by the March Business Confidence Index rose to a weak 41.0 from 33.4 in February. “Approximately 68% of supply managers expect worsening business conditions over the next six months,” said Goss.

Inventories: The regional inventory index, reflecting levels of raw materials and supplies, climbed to 54.6 from February’s 54.4. Said Goss, “Slack sales among manufacturers in Creighton’s survey have resulted in higher inventories.” 

Trade: Trade numbers improved for the month with new export orders soaring to 53.9 from February’s 23.9.  March’s import reading climbed to a weak 44.2 from 38.1 in February. 

Other survey components of the March Business Conditions Index were: New orders increased to a weak 47.8 from 40.5 in February; the production or sales index improved to 50.1 from February’s 42.9; and the speed of deliveries of raw materials and supplies decreased to 54.5 from February’s 54.8. The reduction indicates a fall in supply chain disruptions and delivery bottlenecks for the month.

Below are the state reports:

Arkansas: The state’s Business Conditions Index increased to 50.1 from February’s 40.9. Components from the March survey of supply managers were: new orders at 48.4; production or sales at 51.0; delivery lead time at 54.1; inventories at 54.1; and employment at 43.0. According to the latest month’s U.S. Bureau of Labor Statistics data, there were 1.43 job openings for every unemployed worker in the state. This is well down from 2.0 recorded 12 months earlier.    

Iowa: The state’s Business Conditions Index for March improved to 51.8 from 49.3 in February. Components of the overall March index were: new orders at 48.5; production or sales at 51.2; delivery lead time at 54.8; employment at 47.1; and inventories at 57.4. According to the latest month’s U.S. Bureau of Labor Statistics data, there were 2.0 job openings for every unemployed worker in the state. This is the same ratio recorded 12 months earlier.    

Kansas: The Kansas Business Conditions Index for March dropped to 45.6 from 50.7 in February.  Components of the leading economic indicator from the monthly survey of supply managers for March were: new orders at 48.0; production or sales at 50.7; delivery lead time at 52.3; employment at 31.9; and inventories at 45.1. According to the latest month’s U.S. Bureau of Labor Statistics data, there were 2.0 job openings for every unemployed worker in the state. This is the same ratio recorded 12 months earlier.    

Minnesota: The March Business Conditions Index for Minnesota sank to 47.4 from February’s 52.4. Components of the overall March index were: new orders at 48.2; production or sales at 50.8; delivery lead time at 53.0; inventories at 48.7; and employment at 36.3. According to the latest month’s U.S. Bureau of Labor Statistics data, there were 2.0 job openings for every unemployed worker in the state. This is down from 2.5 openings for each unemployed worker recorded 12 months earlier.   

Missouri: The state’s March Business Conditions Index expanded to 53.8 from 46.6 in February. Components of the overall index from the survey of supply managers for March were: new orders at 48.8; production or sales at 46.2; delivery lead time at 56.3; inventories at 64.9; and employment at 52.5. According to the latest month’s U.S. Bureau of Labor Statistics data, there were 2.0 job openings for every unemployed worker in the state. This is down from 2.5 openings for each unemployed worker recorded 12 months earlier.    

Nebraska: For the fifth time in the past six months, Nebraska’s Business Conditions Index moved below growth neutral.  The overall reading for March increased to 49.7 from 45.7 in February. Components of the index from the monthly survey of supply managers for March: new orders at 48.4; production or sales at 51.0; delivery lead time at 54.0; inventories at 53.3; and employment at 42.0. According to the latest month’s U.S. Bureau of Labor Statistics data, there were 2.0 job openings for every unemployed worker in the state. This is down from 2.5 openings for each unemployed worker recorded 12 months earlier.    

North Dakota: After three straight months of above growth neutral readings, the overall index fell below 50.0 for March.  The state’s overall, or Business Conditions Index, sank to 43.9 from February’s 51.3.  Components of the overall index for March were: new orders at 47.9; production or sales at 50.5; delivery lead time at 51.6; employment at 27.8; inventories at 41.8. According to the latest month’s U.S. Bureau of Labor Statistics data, there were 3.3 job openings for every unemployed worker in the state. This is unchanged from 3.3 openings for each unemployed worker recorded 12 months earlier.     

Oklahoma: The state’s Business Conditions Index expanded to a solid 53.3 from February’s 46.9. Components of the overall March index were: new orders at 48.6; production or sales at 51.3; delivery lead time at 55.4; inventories at 60.3; and employment at 50.7. According to the latest month’s U.S. Bureau of Labor Statistics data, there were 1.7 job openings for every unemployed worker in the state. This is down from 2.5 openings for each unemployed worker recorded 12 months earlier.   

South Dakota: The March Business Conditions Index for South Dakota bounced to a regional high 60.8 from February’s regional high 56.2. Components of the overall index were: new orders at 49.4; production or sales at 52.1; delivery lead time at 59.4; inventories at 68.1; and employment at 75.0. According to the latest month’s U.S. Bureau of Labor Statistics data, there were 2.5 job openings for every unemployed worker in the state. This is down from 3.3 openings for each unemployed worker recorded 12 months earlier.    

Survey results for the month of April will be released on May 1, 2024, the first business day of the month.

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For historical data and forecasts visit our website https://www.creighton.edu/economicoutlook/