Public Relations  >  News Center  >  News Releases  >  November, 2016  >  November 1, 2016  >  Mid-America Business Conditions Weaken Again
Mid-America Business Conditions Weaken Again

October highlights:

  • For a fourth straight month, the overall index was below growth neutral 50.0.
  • Employment index remained below growth neutral for a fifth consecutive month.
  • Government data show that over the past 12 months regional manufacturing employment declined by 1.3 percent, but regional nonmanufacturing employment expanded by 0.9 percent.
  • More than one-third of supply managers reported selling abroad was an important contributor to their companies’ sales revenues.
  • Approximately 36.5 percent of supply managers indicated purchasing from abroad was an important contributing factor to their companies’ profitability.

Mid-America OctoberThe Creighton University Mid-America Business Conditions Index, a leading economic indicator for a nine-state region stretching from Arkansas to North Dakota, declined for October.

Overall index: The Business Conditions Index, which ranges between 0 and 100, fell in October to 43.8 from September’s 45.5. This is the fourth straight month the index has moved below growth neutral 50.0. Like the national survey of supply managers, our regional survey is indicating the manufacturing sector continues to experience negative growth.

“Even with oil prices hovering around $50 per barrel for the month, weakness among manufacturers linked to agriculture and energy continue to weigh on regional economic conditions. Due to the heavy dependence of the region on these two sectors, I expect the regional economy to continue to underperform the national economy. Despite the decline in manufacturing, the nonmanufacturing sector of the regional economy is expanding, albeit at a slow pace,” 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 indicates the nine-state manufacturing sector continues to lose jobs, as the index fell below growth neutral for the fifth straight month. The job gauge for October declined to 44.4 from September’s 46.8. “The growth gap between regional manufacturing and nonmanufacturing remains wide. Over the last 12 months, U.S. Bureau of Labor Statistics data indicate that the region’s manufacturing sector lost almost 19,000 jobs, a 1.4 percent decline, while regional nonmanufacturing added almost 104,000 jobs, an increase of 1.0 percent,” said Goss.

Wholesale Prices: The wholesale inflation gauge remained in a range indicating modest inflationary pressures at the wholesale level, though the prices-paid index declined to 57.4 from September’s 59.7.

One supply manager said, “We notice costs moving upwards, but the most serious concern is the increased cost of insurance benefits. That is the biggest impact we have had this year.”

“Even though wholesale price inflation remains in a range indicating only modest upward price pressures, I expect the Federal Reserve to raise interest rates at the December meeting of its rate setting committee,” said Goss. “The year-over-year core consumer price index, which excludes food and energy, has risen above 2 percent for 11 straight months.”

Confidence: Looking ahead six months, economic optimism, as captured by the October business confidence index, slumped to a frail 39.7 from 48.5 in September. “Global economic uncertainty and weakness in the region’s agricultural and energy sector are weighing on the business economic outlook of supply managers,” according to Goss.

Inventories: The October inventory index, which tracks the change in the level of raw materials and supplies, plummeted to 38.5 from September’s 40.1. “A less than optimistic economic outlook has pushed supply managers to cut their companies’ inventory of raw materials and supplies,” said Goss.

Trade: The new export orders index advanced to a still weak 47.3 from 33.8 in September, and the import index increased slightly to 44.6 from September’s 43.4. “Supply managers reported the slowing global economic conditions were restraining export growth while the domestic economy slowdown was curtailing buying from abroad,” said Goss.

In the Creighton October survey supply managers were asked to gauge the importance of international markets to their company. More than one-third, or 34.9 percent, of supply managers reported that selling abroad was an important contributing factor to their companies’ revenues and profitability. Approximately 36.5 percent of supply managers indicated purchasing from abroad was an important contributing factor for their companies’ profitability.

Other components: Components of the October Business Conditions Index were new orders at 41.4, down slightly from 41.9 in September; production or sales index was 39.1, down from 45.7 in September; and delivery speed of raw materials and supplies rose to 55.6 from last month’s 53.1.

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 October sank to 41.5 from 45.7 in September. Components of the index from the monthly survey of supply managers were new orders at 35.0, production or sales at 37.8, delivery lead time at 56.7, inventories at 35.0, and employment at 42.9. “Gains for nondurable goods manufacturers in the state were more than offset by losses for the larger durable goods sector,” said Goss. Percent of job changes over 12 months; Manufacturing, -0.5%; All nonfarm,+1.6%.

Iowa: The October Business Conditions Index for Iowa rose slightly to a frail 48.9 from September’s 48.0. Components of the overall index from the monthly survey of supply managers were new orders at 39.4, production or sales at 47.8, delivery lead time at 55.8, employment at 51.2, and inventories at 50.2. “Metal producers and machinery manufacturers experienced downturns in economic activity. Additionally, food processors recorded cutbacks in business activity,” said Goss. Percent of job changes over 12 months; Manufacturing, -1.9%; All nonfarm, +1.9%.

Kansas: The Kansas Business Conditions Index for October slumped slightly to 43.7 from 43.9 in September. Components of the leading economic indicator from the monthly survey of supply managers were new orders at 47.8, production or sales at 37.9, delivery lead time at 36.5, employment at 48.9, and inventories at 47.3. “Durable goods producers, including machinery manufacturers, experienced downturns in economic activity. This more than offset slight gains for nondurable goods producers, such as food processors,” said Goss. Percent of job changes over 12 months; Manufacturing, -0.4%; All nonfarm, -0.4%.

Minnesota: The October Business Conditions Index for Minnesota increased to 48.7 from September’s 48.4. Components of the overall October index from the monthly survey of supply managers were new orders at 40.4, production or sales at 38.1, delivery lead time at 62.3, inventories at 44.8, and employment at 57.8. “Durable goods manufacturers in the state, such as metal producers and machinery manufacturers, recorded losses for the month. This activity more than offset gains for nondurable goods producers such as food processors,” said Goss. Percent of job changes over 12 months; Manufacturing, -0.2%; All nonfarm, +1.6%.

Missouri: The October Business Conditions Index for Missouri slumped to 41.6 from September’s 47.3. Components of the overall October index from the survey of supply managers were new orders at 40.1, production or sales at 40.1, delivery lead time at 51.7, inventories at 35.2, and employment at 43.0. “Fabricated metal producers and machinery manufacturers in the state continue to experience pullbacks in economic activity, especially for those firms linked to international markets and agriculture,” said Goss. Percent of job changes over 12 months; Manufacturing, -0.9%; All nonfarm,+1.1%.

Nebraska: The October Business Conditions Index for Nebraska fell to 43.3 from 44.6 in September. Components of the index from the monthly survey of supply managers were new orders at 40.5, production or sales at 38.2, delivery lead time at 54.7, inventories at 39.0, and employment at 44.3. “Manufacturers with ties to agriculture and energy continue to experience downturns in economic activities. On the other hand, food processors in the state are detailing improving economic conditions,” said Goss. Percent of job changes over 12 months; Manufacturing, -0.1%; All nonfarm,+1.0%.

North Dakota: North Dakota’s leading economic indicator for October once again sank below growth neutral 50.0. The Business Conditions Index for the month fell to 40.5 from 48.2 in September. Components of the overall index from the monthly survey of supply managers were new orders at 37.2, production or sales at 47.8, delivery lead time at 51.1, employment at 37.7, and inventories at 28.7. “Both durable and nondurable goods firms in the state, especially those linked to farming and energy, experienced pullbacks in economic activity for the month,” said Goss. Percent of job changes over 12 months; Manufacturing, -2.3%; All nonfarm, -1.3%.

Oklahoma: After moving above growth neutral for May, Oklahoma’s Business Conditions Index has been below growth neutral 50.0 for five consecutive months. The October index sank to a regional low of 38.8 from 40.3 in September, also a regional low. Components of the overall October index from a survey of supply managers in the state were new orders at 47.7, production or sales at 35.2, delivery lead time at 57.8, inventories at 19.2, and employment at 33.9, “Both durables goods producers and nondurable goods manufacturers linked to energy continue to lose jobs,” said Goss. Percent of job changes over 12 months; Manufacturing, -6.9%; All nonfarm, -0.7%.

South Dakota: The Business Conditions Index for South Dakota fell to 46.8 from September’s regional high of 51.1. This is the first time the index has moved below growth neutral after nine straight months above the 50.0 threshold. Components of the overall index for the October survey of supply managers in the state were new orders at 47.8, production or sales at 37.5, delivery lead time at 57.8, inventories at 45.6, and employment at 42.1.“Manufacturers in the state linked to agriculture, energy and international markets, detailed downturns in economic activity,” said Goss. Percent of job changes over 12 months; Manufacturing, -2.2%; All nonfarm, +2.5%.

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

Follow Goss on Twitter at http://twitter.com/erniegoss

For historical data and forecasts visit our website at http://business.creighton.edu/organizations-programs/economic-outlook

---
Creighton University is a Jesuit, Catholic university bridging health, law, business and the arts and sciences for a more just world.