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Mid-America Business Conditions Index Improves

January survey results at a glance:

  • For a sixth straight month, the region’s overall index moved below growth neutral.
  • Weakness for Missouri, North Dakota, and Oklahoma, more than offset readings above growth neutral for the remaining six states.
  • Employment index improved, but remained below growth neutral for a fifth consecutive month. Over the past year, the region lost almost 20,000 durable manufacturing jobs but gained approximately 3,000 nondurable jobs.
  • The strong U.S. dollar sank export orders, but boosted imports for the month.

Rural sceneThe Creighton University Mid-America Business Conditions Index for January, a leading economic indicator for a nine-state region stretching from Arkansas to North Dakota, expanded for the first time since June of last year, but remained below growth neutral.

Overall index: The January Business Conditions Index, which ranges between 0 and 100, improved to a still weak 48.3 from December’s 39.5. The regional index, much like the national reading, is now in negative territory indicating manufacturing losses linked to the strong U.S. dollar and to economic weakness among global trading partners.

“The U.S. dollar strengthened by almost 9 percent since June of last year and on Friday, the dollar posted its largest gain against the Japanese yen since the fourth quarter of 2014. This, along with economic weakness among the nation’s chief trading partners, has squeezed, and will continue to squeeze, U.S. and regional manufacturers,” 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 increased for January but remained below growth neutral at 49.3, up from December’s 37.1. Over the past year, the region has lost approximately 20,000 durable manufacturing jobs, or 2.4 percent of heavy manufacturing jobs. During this same period, the rest of the nation gained 7,000, or 0.2 percent, in durable goods manufacturing jobs. “Areas and industries heavily dependent on durable goods manufacturing, especially those linked to exports, agriculture and energy, are experiencing the largest losses,” said Goss.

This month businesses were asked to describe their hiring situation in January. Approximately 46.3 percent of the businesses reported that the number of applicants exceeded the number of available jobs at their firm. On the other hand, 18.5 percent of businesses reported shortages of workers for company job openings.

Wholesale Prices: The wholesale inflation index for January rose to 52.4 from December’s 48.2. “Prices for raw materials and supplies, as reported by regional supply managers, are rising at a pace that will undercut the Federal Reserve’s goal of 2 percent growth in consumer prices,” said Goss.

Confidence: Looking ahead six months, economic optimism, as captured by the January business confidence index, fell to 42.2 from December’s 49.1. “Falling agriculture and energy commodity prices, along with global economic uncertainty, continues to restrain supply managers’ expectations of future economic conditions,” said Goss.

Inventories: In another sign of a sinking economic outlook, supply managers reduced their inventory levels for the month, though at a slower pace. The January inventory index, which tracks the change in the level of raw materials and supplies, increased to 49.3 from 43.6 in December.

Trade: The new export orders stood at a weak 40.0, up from 33.8 in December. The import index for January expanded to 53.1 from December’s 40.0. “The strong U.S. dollar, making U.S. goods less competitively priced abroad, and a weaker global economy, hammered new export orders for the month. On the other hand, the strong dollar, making foreign goods more competitively prices boosted imports above growth neutral for the month,” said Goss.

“Since October of 2015, the value of the U.S. dollar has expanded by more than 8 percent against the Canadian dollar. The number one export market for each state in the Mid-America region is Canada, and this will put downward pressure on regional exports,” said Goss.

Other components: Components of the January Business Conditions Index were new orders at 43.7, up from 34.6 in December; production or sales moved higher to 45.3 from December’s 35.4; and delivery speed of raw materials and supplies rose to 53.9 from last month’s 47.3.

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 state’s January overall index, or leading economic indicator, climbed to 50.1 from December’s 40.1. Components of the index from the monthly survey of supply managers were new orders at 45.3, production or sales at 47.0, delivery lead time at 55.9, inventories at 51.2, and employment at 51.0. “According to the latest U.S. government data, exports represent approximately 5.7 percent of the state’s overall economy. This puts Arkansas in 37th place among the 50 states. Since Canada is Arkansas’s number one export market, state exports will remain under pressure since the value of the U.S. dollar to the Canadian dollar has climbed by more than 8 percent since October 2015,” said Goss.

Iowa: The January Business Conditions Index for Iowa soared to a tepid, but positive, 50.3 from 41.2 in December. Components of the index from the monthly survey of supply managers were new orders at 45.5, production or sales at 47.2, delivery lead time at 56.1, employment at 51.4, and inventories at 51.2. “According to the latest U.S. government data, exports represent approximately 8.9 percent of the state’s overall economy. This places Iowa in 18th place among the 50 states. Since Canada is Iowa’s number one export market, exports will remain under pressure since the value of the U.S. dollar to the Canadian dollar has climbed by more than 8 percent since October 2015,” said Goss.

Kansas: The Kansas Business Conditions Index for January rose to 50.7 from December’s 41.7. Components of the leading economic indicator from the monthly survey of supply managers were new orders at 45.8, production or sales at 47.5, delivery lead time at 56.5, employment at 51.9, and inventories at 51.5. “According to the latest U.S. government data, exports represent approximately 8.3 percent of the state’s overall economy. This places Kansas in 20th place among the 50 states. Since Canada is Kansas’s number one export market, exports will remain under pressure since the value of the U.S. dollar to the Canadian dollar has climbed by more than 8 percent since October 2015,” reported Goss.

Minnesota: The January Minnesota Business Conditions Index jumped to 50.1 from December’s 39.4. Components of the index from the monthly survey of supply managers were new orders at 44.8, production or sales at 46.5, delivery lead time at 55.3, inventories at 49.7, and employment at 53.9. “According to the latest U.S. government data, exports represent approximately 6.8 percent of the state’s overall economy. This places Minnesota in 29th place among the 50 states. Since Canada is Minnesota’s number one export market, exports will remain under pressure since the value of the U.S. dollar to the Canadian dollar has climbed by more than 8 percent since October 2015,” reported Goss.

Missouri: The January Business Conditions Index for Missouri increased to 47.7 from December’s 38.9. Components of the index from the survey of supply managers were new orders at 43.2, production or sales at 44.8, delivery lead time at 53.2, inventories at 49.0, and employment at 48.4. “According to the latest U.S. government data, exports represent approximately 5.1 percent of the state’s overall economy. This places Missouri in 39th place among the 50 states. Since Canada is Missouri’s number one export market, state exports will remain under pressure since the value of the U.S. dollar to the Canadian dollar has climbed by more than 8 percent since October 2015,” reported Goss.

Nebraska: January’s Business Conditions Index for the state climbed to a regional high of 54.3 from 43.5 in December. After six straight months of falling below growth neutral, the index, a leading economic indicator from a monthly survey of supply managers bounced to its highest level since April of last year. Components of the index were new orders at 49.1, production or sales at 51.0, delivery lead time at 60.6, inventories at 55.7, and employment at 55.1. According to the latest U.S. government data, exports represent approximately 7.1 percent of the state’s overall economy. This places Nebraska in 27th place among the 50 states. Since Canada is Nebraska’s number one export market, exports will remain under pressure since the value of the U.S. dollar to the Canadian dollar has climbed by more than 8 percent since October 2015,” said Goss.

North Dakota: North Dakota’s leading economic indicator for January remained below growth neutral 50.0. The Business Conditions Index was a regional low 41.3, up from December’s 35.5, also a regional low. Components of the overall index from the monthly survey of supply managers were new orders at 37.3, production or sales at 38.7, delivery lead time at 46.0, employment at 42.1, and inventories at 42.1. According to the latest U.S. government data, exports represent approximately 9.8 percent of the state’s overall economy. This places North Dakota in 13th place among the 50 states. Since Canada is North Dakota’s number one export market, exports will remain under pressure since the value of the U.S. dollar to the Canadian dollar has climbed by more than 8 percent since October 2015,” said Goss.

Oklahoma: The January Business Conditions Index for Oklahoma slumped below growth neutral for a ninth straight month. The index from a monthly survey of supply managers climbed to a weak 48.3 from 35.5 in December. Components of the January survey of supply managers were new orders at 43.7, production or sales at 45.3, delivery lead time at 53.9, inventories at 49.7, and employment at 48.9. “According to the latest U.S. government data, exports represent approximately 3.4 percent of the state’s overall economy. This places Oklahoma in 48th place among the 50 states. Since Canada is Oklahoma’s number one export market, exports will remain under pressure since the value of the U.S. dollar to the Canadian dollar has climbed by more than 8 percent since October 2015,” reported Goss.

South Dakota: After falling below growth neutral for three straight months, South Dakota’s leading economic indicator rose above the 50.0 threshold to 51.3 from 40.2 in December. Components of the overall index for January were new orders at 46.4, production or sales at 48.2, delivery lead time at 57.3, inventories at 52.4, and employment at 52.5. “According to the latest U.S. government data, exports represent approximately 3.5 percent of the state’s overall economy. This places South Dakota in 47th place among the 50 states. Since Canada is South Dakota’s number one export market, exports will remain under pressure since the value of the U.S. dollar to the Canadian dollar has climbed by more than 8 percent since October 2015,” reported Goss.

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

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For historical data and forecasts visit our website

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