Mid-American States

Mid-American States

Slowing Growth Ahead for Mid-America:
Job Losses for April

April survey results at a glance:

·       Leading economic indicator rises but remains in slow growth range.
·       Hiring gauge drops below growth neutral.
·       Approximately 29.1 percent of firms report shortages of qualified applicants for open positions.
·       Inflation reading still indicating only modest wholesale price growth.
·       Supply managers expect prices of goods and services sold by their firm to expand by a very modest 1.6 percent over the next year.

The Creighton University Mid-America Business Conditions Index for April, a leading economic indicator for a nine-state region stretching from North Dakota to Arkansas, climbed from March’s reading. Indices over the past several months are pointing to positive, but slower, economic growth over the next three to six months for the region.             

Overall index: The Business Conditions Index, which ranges between 0 and 100, rose to 52.7 from March’s 51.4. The regional index, much like the national reading, is pointing to positive, but slow growth through the third quarter of 2015.

“Firms linked to energy and agriculture are experiencing pullbacks in economic activity. Growth in Oklahoma and North Dakota, two energy-producing states, is approximately one-third to one-half of what it was one year ago. That growth is likely to move even lower in the months ahead as the strong U.S. dollar slows growth even more,” 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 in a range indicating slightly negative to stagnant job growth for manufacturing and value-added services firms in the region. The job gauge sank to 49.2 from March’s tepid 52.5.

“This month we asked about the hiring situation at survey participants’ firms. Approximately 29.1 percent of supply managers reported a shortage of applicants for open positions at their companies. This is up slightly from 27.1 percent in November of last year when we asked this same question. Thus even with job cuts, there remain labor shortages for more skilled workers,” said Goss.    

Wholesale Prices: The wholesale inflation index for April dipped slightly to 55.5 from 55.7 in March. “A strengthening U.S. dollar and significantly lower fuel prices have pushed wholesale inflationary pressures in our surveys over the past several months to levels indicating only a modest upward movement. Survey participants expect the prices of products and services sold by their company to advance by a modest 1.6 percent over the next year,” said Goss.  

Confidence: Looking ahead six months, economic optimism, as captured by the April business confidence index, advanced to 61.5 from March’s 55.7. “Improving economic expectations from non-energy firms, resulting from lower energy prices, more than offset economic pessimism stemming from weakness in firms directly tied to energy,” said Goss. 

Inventories: The inventory index, which tracks the change in the level of raw materials and supplies, increased slightly to 48.5 from 48.4 in March.     

Trade: The new export orders index slid to 53.5 from 56.4 in March. The import index for April fell to 46.8 from March’s 53.5. “Over the past six months, the value of the U.S. dollar has risen dramatically against the currencies of our chief trading partners. This movement has made U.S. goods less competitively priced abroad and foreign goods more cheaply priced in the U.S..  Despite this, the new export orders index remained in positive territory for April. I expect the export orders index to move even lower in the months ahead,” said Goss.   

“Regional exports for 2014 were approximately $90.5 billion. The strong U.S. dollar is likely push 2015 exports down by as much as ten percent below 2014 levels,” said Goss.

Other components: Other components of the April Business Conditions Index were new orders at 55.5, down from 60.2 in March; production or sales improved to 57.3 from March’s 41.8; and delivery speed of raw materials and supplies decreased to 53.2 from last month’s 54.0.    

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 by the National Institute for Supply Management, formerly the Purchasing Management Association, since 1931.

Arkansas: The April overall index, or leading economic indicator for Arkansas, slipped to 53.6 from March’s regional high of 54.9. Components of the index from the monthly survey of supply managers were new orders at 55.2, production or sales at 58.2, delivery lead time at 55.6, inventories at 49.3, and employment at 50.0. “The state’s exports have declined for 2013 and again for 2014 to $6.9 billion. The strong U.S. dollar will push 2015 exports even lower.  Durable goods manufacturers have been experiencing much stronger economic conditions than nondurable goods producers in the state,” said Goss.  

Iowa: Iowa’s Business Conditions Index advanced to 53.3 from 51.6 in March. Components of the index from the monthly survey were new orders at 56.1, production or sales at 55.4, delivery lead time at 53.7, employment at 49.7, and inventories at 51.4. “Iowa’s exports peaked at $15.1 billion in 2014.  Our survey results indicate that Iowa international sales will weaken for 2015.    I expect the stronger U.S. dollar to negatively affect one of Iowa’s chief exports, agricultural equipment, for the rest of year. This will slow overall state growth for the remainder of the year.  Even so, I expect state economic growth to remain positive for 2015, but well below 2014’s rate,” said Goss.  

Kansas: The Kansas Business Conditions Index for April expanded to 51.2 from March’s 50.7. Components of the leading economic indicator from the monthly survey of supply managers were new orders at 53.9, production or sales at 55.6, delivery lead time at 51.6, employment at 47.8, and inventories at 47.1. “Kansas’s export sales are highly volatile. They peaked in 2013 and declined in 2014. I expect 2015 export sales to come in even weaker than 2014 sales. Nonetheless state growth for 2015 will remain positive, but down from that achieved in 2014 for the same period of time,” said Goss.  

Minnesota:  Last month, the Minnesota Business Conditions Index, fell to growth neutral. The overall index for April increased slightly to 51.3 from March’s 50.0. Components of the index from the April survey of supply managers were new orders at 55.6, production or sales at 55.7, delivery lead time at 51.7, inventories at 47.5, and employment at 47.9. “Minnesota’s export sales reached a record high of over $21.3 billion in 2014. I expect the strong U.S. dollar and slow global growth to push Minnesota’s 2015 export growth into negative territory.  Even so, the state economy will continue to expand, but at a slower pace than for the same period in 2014,” said Goss.

Missouri: The April Business Conditions Index for Missouri rose to 54.4 from 52.1 in March.  Components of the index from the survey of supply managers were new orders at 55.8, production or sales at 59.1, delivery lead time at 54.3, inventories at 50.0, and employment at 52.2.  “Missouri’s exports expanded by more than nine percent for 2014 to $14.9 billion. The strong dollar will reduce Missouri exports and state economic growth for 2015 below that achieved in 2014. Even so, the state will add jobs at a positive but slow pace in 2015,” said Goss.  

Nebraska:  For the 17th straight month, Nebraska’s Business Conditions Index remained above growth neutral 50.0. The leading economic indicator for April climbed to a regional high of 54.6 from March’s 51.8. Components of the index were new orders at 55.2, production or sales at 59.3, delivery lead time at 55.1, inventories at 50.2, and employment at 53.4. “Nebraska’s exports expanded by more than six percent to a record high of $7.9 billion for 2014. The strong U.S. dollar will push 2015 export growth into negative territory even as the overall state economy grows, but at a slower pace than in 2014. Durable goods manufacturing shed economic activity for the month,” said Goss.

North Dakota: North Dakota’s leading economic indicator for April climbed to a level pointing to positive, but much slower, economic growth in the next three to six months. The Business Conditions Index declined to 51.6 from a revised 53.2 in March. Components of the overall index from the monthly survey of supply managers were new orders at 55.6, production or sales at 56.4, delivery lead time at 52.0, employment at 45.6, and inventories at 47.4. “North Dakota’s 2014 exports expanded by almost 42 percent from a year earlier to a record $5.3 billion. The downturn in energy prices, and the strong U.S. dollar will all reduce export growth by double digits for 2015. Overall state growth will remain positive for the next three to six months, but off significantly from the same period in 2014,” reported Goss.  

Oklahoma:  The Business Conditions Index for Oklahoma sank for April, but still signals positive, slow growth in the next three to six months. The index for April decreased to 50.8 from 51.6 in March. Components of the April survey of supply managers were new orders at 53.5, production or sales at 55.2, delivery lead time at 51.2, inventories at 45.6, and employment at 48.7. “After reaching a record high of $6.9 billion in 2013, Oklahoma’s exports declined by almost nine percent for 2014. I expect a double-digit decline in state exports for 2015 stemming from lower energy prices and a strong dollar. This will reduce 2015 growth well below that experienced in 2014,” said Goss.  

South Dakota: After moving below growth neutral in November of 2012, South Dakota’s leading economic indicator has been above growth neutral 50.0 each month since. The Business Conditions Index, from the monthly survey of supply managers, rose to 54.2 from 50.9 in March. Components of the overall index for April were new orders at 57.1, production or sales at 58.9, delivery lead time at 54.6, inventories at 49.8, and employment at 50.6. “South Dakota exports for 2014 were $1.6 billion and down from record exports of $1.7 billion achieved in 2008. I expect the strong U.S. dollar to push 2015 exports ten percent below their 2014 levels and slow overall growth below that achieved in 2014,” said Goss.

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