Mid-American States

Mid-America Business Conditions Index Remains Above Growth Neutral: Export Orders Soar for the Month

April survey results at a glance:

* After three straight months of expanding, the region’s overall index declined, but remained above growth neutral 50.0.
* The employment gauge sank below growth neutral for the month.
* Over the past year, the region’s manufacturing sector has lost approximately 1.9 percent, or roughly 26,000 manufacturing jobs.
* Every state in the region, except for Minnesota, has lost manufacturing jobs over the past 12 months with North Dakota and Oklahoma accruing the largest percentage losses
* More than one-third of supply managers reported that data security was second only to price in selecting a supplier or vendor.

OMAHA, Neb. (May 2, 2016)  – The Creighton University Mid-America Business Conditions Index for April, a leading economic indicator for a nine-state region stretching from Arkansas to North Dakota, declined, but remained above growth neutral for a second consecutive month.

Overall index: The April Business Conditions Index, which ranges between 0 and 100, dipped slightly to a weak 50.1 from March’s 50.6. Over the past several months, the regional index, much like the national reading, has indicated the manufacturing sector is experiencing anemic, but stabilizing, business conditions.    

“A somewhat weaker U.S. dollar, making U.S. goods more competitively priced abroad, contributed to stabilizing business conditions across the region.  At the same time continuing weakness in the region’s agriculture and energy sectors remains an obstacle to improving overall growth,” said Ernie Goss, Ph.D., 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 gauge remained below growth neutral falling to 45.0 from March’s 45.9. “Manufacturers in the region continue to shed jobs even as the overall regional economy adds jobs, albeit at a slow pace. Over the past year, the region’s manufacturing sector has lost approximately 1.9 percent, or roughly 26,000, manufacturing jobs. The losses in manufacturing have spilled over into the broader regional economy, and reduced overall annualized regional employment growth from 1.5 percent to 0.7 percent over the past year. I expect the broader economy to continue to add jobs, but at an even slower pace,” said Goss.  

“Every state in the region, except for Minnesota, has lost manufacturing jobs over the past 12 months with North Dakota and Oklahoma accruing the largest percentage of losses,” said Goss.

This month, supply managers were asked the importance of data security in choosing a vendor or supplier. Approximately 8.4 percent indicated it was the most important factor in selecting a supplier and roughly 27.7 percent said security was second only to price in picking a supplier of inputs. 

As stated by one survey participant, “Data security is of utmost importance in all aspects of an Internet driven business. Continued support from our government as well as from all countries is required to sustain and grow the free market system.”

Almost one-fourth, or 24.1 percent, reported data security was only a minor factor in selecting a vendor. The remaining 39.8 percent indicated data security was only one of the important factors in choosing a supplier.

Wholesale Prices: The wholesale inflation index for April rose slightly to 62.4 from March’s 62.2, its highest level since June of last year, and up significantly from February’s 52.5. “Prices for raw materials and supplies, as reported by regional supply managers, are rising at a pace, if matched in future months, will push the Federal Reserve to move short-term interest rates up at a pace higher than currently expected,” said Goss.

Confidence: Looking ahead six months, economic optimism, as captured by the April business confidence index, slipped to 51.3 from March’s 51.4. “Improving prices for manufactured products and commodities over the last several months pushed the index above growth neutral over the last two months,” said Goss. 

Inventories: The April inventory index, which tracks the change in the level of raw materials and supplies, declined to growth neutral 50.0 from 50.8 in March.        

Trade: The new export orders improved jumped to a strong 57.6 from 50.0 in March. The import index for April expanded to 58.0 from March’s 55.4. “Recent weakness in the U.S. dollar, making U.S. goods more competitively priced abroad, sent the export reading much higher for the month. At the same time, growth in regional manufacturing, though slight, pushed supply managers to increase buying from abroad,” said Goss.

Other components:  Components of the April Business Conditions Index were new orders at 51.3, down from 53.6 in March; production or sales dipped to 50.7 from March’s 50.8; and delivery speed of raw materials and supplies increased to 53.7 from last month’s 52.1.    

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, formerly the National Association of Purchasing Management.

Arkansas: Arkansas’ overall index for April, or leading economic indicator, dipped to 49.5 from March’s 51.0. Components of the index from the monthly survey of supply managers were new orders at 50.7, production or sales at 50.1, delivery lead time at 52.4, inventories at 49.7, and employment at 44.9. “Weakness among the state’s durable goods manufacturers more than offset slight gains for nondurable goods producers for the month.  Over the last 12 months, Arkansas manufacturers shed 2,500 jobs, or approximately 1.6 percent, of overall manufacturing jobs,” said Goss.
 
Iowa: The April Business Conditions Index for Iowa slid to 50.1 from March’s 51.3. Components of the index from the monthly survey of supply managers were new orders at 51.1, production or sales at 50.4, delivery lead time at 53.6, employment at 45.2, and inventories at 50.1. “Weakness among the state’s durable goods manufacturers more than offset slight gains for nondurable goods producers in the state for the month.  Over the last 12 months, Iowa manufacturers lost 5,900 jobs, or approximately 2.7 percent, of overall manufacturing jobs,” said Goss.
 
Kansas: The Kansas Business Conditions Index for April sank to 48.9 from 49.5 in March. Components of the leading economic indicator from the monthly survey of supply managers were new orders at 49.8, production or sales at 49.2, delivery lead time at 52.3, employment at 44.1, and inventories at 48.9. “Kansas manufacturers, both durable and nondurable, are experiencing weak business conditions. Combined durable and nondurable producers in the state shed 1,600 jobs, or approximately 1.0 percent, of total state manufacturing employment over the past 12 months,” reported Goss.

Minnesota: The April Minnesota Business Conditions Index declined to 49.8 from 50.7 in March.  Components of the index from the monthly survey of supply managers were new orders at 50.8, production or sales at 50.2, delivery lead time at 53.3, inventories at 49.8, and employment at 45.0. “Over the past 12 months, Minnesota durable goods producers reduced employment by 1,100 while nondurable goods manufacturers added 1,200. As a result, the state gained approximately 100 manufacturing jobs, or approximately 0.03 percent, over the 12 months,” said Goss.

Missouri: The April Business Conditions Index for Missouri rose slightly to 50.1 from March’s 49.9. Components of the index from the survey of supply managers were new orders at 51.1, production or sales at 50.4, delivery lead time at 53.3, inventories at 50.0, and employment at 45.2. “Both durable goods and nondurables goods manufacturers in Missouri reduced employment over the past 12 months. Missouri’s manufacturers shed 2,300, or approximately 0.9 percent, jobs over the past 12 months,” reported Goss.

Nebraska:  The April Business Conditions Index for Nebraska slumped to 50.2 from March’s 53.3. Components of the index from the monthly survey of supply managers were new orders at 50.9, production or sales at 50.2, delivery lead time at 55.0, inventories at 49.9, and employment at 45.0. “Weakness among the state’s durable goods manufacturers more than offset slight gains for nondurable goods producers in the state over the past several months.  Over the last 12 months, Nebraska manufacturers shed 900 jobs, or approximately 0.9 percent, of overall manufacturing jobs,” reported Goss.

North Dakota: North Dakota’s leading economic indicator for April remained below growth neutral 50.0. The Business Conditions Index for the month fell to 47.2, a regional low, from March’s 47.8, also a regional low. Components of the overall index from the monthly survey of supply managers were new orders at 48.1, production or sales at 47.5, delivery lead time at 50.5, employment at 42.6, and inventories at 47.2. “The state’s durable goods manufacturers and nondurable goods producers have been shedding jobs at an accelerative pace. Over the past 12 months, North Dakota’s manufacturing sector has reduced employment by 1,200 jobs, or approximately 4.7 percent,” said Goss.

Oklahoma: The April Business Conditions Index for Oklahoma slumped below growth neutral for a twelfth straight month. The index from a monthly survey of supply managers declined to 49.4 from 49.7 in March. Components of the April survey of supply managers were new orders at 50.4, production or sales at 49.8, delivery lead time at 52.9, inventories at 49.4, and employment at 44.6. “Over the past several months, Oklahoma manufacturers, both durable and nondurable, have been shedding jobs at an accelerating pace. Over the past 12 months, Oklahoma’s manufacturing sector has reduced employment by 11,700 jobs, or approximately 8.4 percent,” reported Goss.

South Dakota: The Business Conditions Index for South Dakota advanced to a regional high 51.6 from 51.1 in March. The index has moved above growth neutral for four straight months. Components of the overall index for April were new orders at 51.3, production or sales at 50.1, delivery lead time at 53.8, inventories at 56.0, and employment at 46.5. “Since last fall, South Dakota manufacturers have been reducing employment. Over the past 12 months, the state has lost 1,500, or approximately 3.5 percent, of its manufacturing jobs,” said Goss.

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