Mid-American Economy

Mid-America Business Index Climbs at Year End: Labor Shortages Continue to Restrain Growth

December survey highlights:

  • The overall index moved above growth neutral for the second time in the past three months.

  • For 2019 in terms of overall economic growth, the states ranked from top to bottom: Arkansas, Nebraska, Kansas, South Dakota, Minnesota, Missouri, Iowa, North Dakota, and Oklahoma.

  • Seven of 10 supply managers expect finding and hiring qualified workers to be the greatest 2020 challenge for their firms.  

  • On average, supply managers expect to receive a 2.5% wage increase in 2020.

  • In terms of projected 2020 overall economic growth, the states ranked from top to bottom are: South Dakota, Nebraska, Arkansas, Kansas, Minnesota, Iowa, Missouri, North Dakota, and Oklahoma in ninth place.

OMAHA, Neb. (Jan. 2, 2020) – The December 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.  

Overall index: This is the second time in the last three months that the overall reading has climbed above growth neutral 50.0. The Business Conditions Index, which ranges between 0 and 100, rose to 50.6 from November’s 48.6.

“Surveys over the past several months indicate that the regional manufacturing economy is being negatively impacted by the trade war with China and the global economic slowdown. This will be a drag on the overall Mid-America economy for the first half of 2020. However, I expect overall regional growth to remain soft but positive for the first half of the year,” 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 December employment index increased to 45.6 from November’s very weak 37.2. The availability of workers continues to constrain job growth in the region. In December, seven of 10 supply managers indicated that finding and hiring qualified workers was the greatest 2020 challenge for their firms.

One supply manager responded, “Biggest challenge to 2020 economic success: Everywhere in our organization is challenged to hire good, steady employees."

The weakness in the region’s manufacturing and agriculture sector has spilled over into the broader regional economy. Over the past 12 months, the Mid-America region has added jobs at a 0.7% pace, or less than half the 1.5% rate of the U.S. economy.

As a result of the weak regional manufacturing regional economy, supply managers expect a low average 2.5% wage gains for 2020.

Wholesale Prices: The wholesale inflation gauge for the month indicated only modest and declining wholesale inflationary pressures with a wholesale price index of 57.6, down from 65.7 in November.

Last month, 43% of supply managers reported tariffs had increased the prices of supplies and inputs purchased by their firm. However, one supply manager said, “The increase in commodities purchased are the result of tariffs.”

“Tariffs have, to date, had only a modest impact on our wholesale inflation gauge,” said Goss.

Another supply manager said, “Open market trade benefits a wider range of consumers over isolating certain items through tariffs.”

Confidence: Looking ahead six months, economic optimism, as captured by the December Business Confidence Index, climbed to 57.6 from November’s 52.9.

“Potential January passage of the U.S. Canada, Mexico trade agreement (USMCA) and Phase I of the trade agreement with China boosted the regional business confidence index for the month,” said Goss.

As stated by one supply manager, “I am very happy to see US/China Phase 1 agreement to cancel tariffs for Dec.15, and cut the Sept. 1 tariffs in half.”

Inventories: Companies expanded inventories of raw materials and supplies for the month, but at a slower pace as the inventory index fell to 50.1 from last month’s 54.6. “Supply managers expanded their inventories in anticipation of higher tariffs in the weeks and months ahead,” reported Goss.

Trade: The regional trade numbers were mixed with new export orders increasing to a weak 43.5 from November’s 39.1. On the other hand, imports were unchanged from November’s 52.0. Supply managers continue to boost purchasing from abroad in anticipation of higher tariffs in the weeks and months ahead.

Other survey components: Other components of the December Business Conditions Index were new orders at 50.1, up from November’s 45.6; the production or sales index moved higher to 48.5 from November’s 44.1; and speed of deliveries of raw materials and supplies index at 54.4 declined from last month’s 61.4.

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 December Business Conditions Index for Arkansas climbed to 53.0 from November’s 49.7. Components of the index from the monthly survey of supply managers were new orders at 54.2, production or sales at 51.4, delivery lead time at 55.3, inventories at 57.2, and employment at 46.7. “For 2019, Arkansas’s overall economy ranked first in economic performance among the nine Mid-America states. Based on recent surveys, I expect the Arkansas economy, for the first half of 2020, to rank third in the region in terms of economic performance with overall annualized inflation-adjusted GDP growth at 2.84%,” said Goss.

Iowa: After falling below growth neutral for November, the state’s overall Business Conditions Index climbed above the threshold for December rising to 50.9 from 49.2 in November. Components of the overall index from the monthly survey of supply managers were new orders at 50.8, production or sales at 48.2, delivery lead time at 54,6, employment at 45.8, and inventories at 55.1. “For 2019, Iowa’s overall economy ranked seventh in economic performance among the nine Mid-America states. Based on recent surveys, I expect the Iowa economy, for the first half of 2020, to rank sixth in the region in terms of economic performance with overall annualized inflation-adjusted GDP growth at 1.5%,” said Goss.

Kansas: The Kansas Business Conditions Index for December increased to 52.1 from November’s 51.0. Components of the leading economic indicator from the monthly survey of supply managers were new orders at 54.1, production or sales at 47.3, delivery lead time at 55.3, employment at 46.7, and inventories at 57.2. “For 2019, Kansas’s overall economy ranked third in economic performance among the nine Mid-America states. Based on recent surveys, I expect the Kansas economy, for the first half of 2020, to rank third in the region in terms of economic performance with overall annualized inflation-adjusted GDP growth at 2.84%,” said Goss. 

Minnesota: The December Business Conditions Index for Minnesota slipped to 50.7 from 50.9 in November. Components of the overall December index from the monthly survey of supply managers were new orders at 49.5, production or sales at 48.1, delivery lead time at 54.7, inventories at 55.4, and employment at 45.9. “For 2019, Minnesota’s overall economy ranked fifth in economic performance among the nine Mid-America states. Based on recent surveys, I expect the Minnesota economy, for the first half of 2020, to rank fifth in the region in terms of economic performance with overall annualized inflation-adjusted GDP growth at 1.7%,” said Goss.

Missouri: The December Business Conditions Index for Missouri rose to 50.5 from November’s 48.4. Components of the overall index from the survey of supply managers were new orders at 49.8, production or sales at 48.5, delivery lead time at 54.3, inventories at 54.4, and employment at 45.5. “For 2019, Missouri’s overall economy ranked sixth in economic performance among the nine Mid-America states. Based on recent surveys, I expect the Missouri economy, for the first half of 2020, to rank seventh in the region in terms of economic performance with overall annualized inflation-adjusted GDP growth at 1.1%,” said Goss.

Nebraska: The Business Conditions Index climbed above growth neutral after falling below the threshold in November. The state’s overall index jumped to 52.1 from 48.2 in November. Components of the index from the monthly survey of supply managers were new orders at 54.2, production or sales at 47.2, delivery lead time at 55.3, inventories at 57.3, and employment at 46.7. “For 2019, Nebraska’s overall economy ranked second in economic performance among the nine Mid-America states. Based on recent surveys, I expect the Nebraska economy, for the first half of 2020, to rank second in the region in terms of economic performance with overall annualized inflation-adjusted GDP growth at 2.9%,” said Goss.

North Dakota: The December Business Conditions Index for North Dakota sank to 48.2 from November’s 50.0. Components of the overall index were new orders at 42.1, production or sales at 49.5, delivery lead time at 53.6, employment at 44.5, and inventories at 52.1. “For 2019, North Dakota’s overall economy ranked eighth in economic performance among the nine Mid-America states. Based on recent surveys, I expect the North Dakota economy, for the first half of 2020, to rank eighth in the region in terms of economic performance with overall annualized inflation-adjusted GDP growth at 0.9%,” said Goss.

Oklahoma:For a third straight month, Oklahoma’s Business Conditions Index sank below growth neutral signaling slow to no growth in the months ahead. The overall index for December rose slightly to 48.4 from November’s 47.8. Components of the overall December index were new orders at 42.1, production or sales at 49.5, delivery lead time at 53.6, inventories at 52.1, and employment at 44.5. “For 2019, Oklahoma’s overall economy ranked ninth in economic performance among the nine Mid-America states. Based on recent surveys, I expect the Oklahoma economy, for the first half of 2020, to rank last in the region in terms of economic performance with overall annualized inflation-adjusted GDP growth at minus 0.2%,” said Goss. 

South Dakota: The December Business Conditions Index for South Dakota climbed to 52.3 from November’s 48.9. Components of the overall index from the December survey of supply managers in the state were new orders at 54.5, production or sales at 47.2, delivery lead time at 55.4, inventories at 57.5, and employment at 46.8. “For 2019, South Dakota’s overall economy ranked fourth in economic performance among the nine Mid-America states. Based on recent surveys, I expect the South Dakota economy, for the first half of 2020, to rank first in the region in terms of economic performance with overall annualized inflation-adjusted GDP growth at 3.0%,” said Goss.

Survey results for January will be released on the first business day, Feb. 3.