Mid-American Economy
Mid-America Economy Points to Soft Landing
Wholesale Inflationary Pressures Waning
April 2023 Survey Highlights:
•. For a third straight month, the region’s overall index climbed above growth neutral.
• The regional wholesale inflation gauge points to waning inflationary pressures.
• Approximately 58% of supply managers expect a 2023 recession.
• For a third consecutive month, the region’s employment gauge moved into a slow growth range.
• Trade numbers, both imports and exports, have been weak for all of 2023.
OMAHA, Neb. (May 1, 2023) — For a third straight month, the Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, expanded above growth neutral.
Overall Index: The Business Conditions Index, which uses the identical methodology as the national Institute for Supply Management (ISM) and ranges between 0 and 100 with 50.0 representing growth neutral, climbed to 54.8 from 50.8 in March.
The Mid-America report is produced independently from the national ISM.
“After flashing recession warning signals between November 2022 and January 2023, Creighton’s monthly survey of manufacturing supply managers is now pointing to positive but slow growth with cooling inflationary pressures at the wholesale level,” 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.
“While it’s too early to tell if the Federal Reserve is achieving its ‘soft landing,’ results from Creighton’s surveys over the last several months are somewhat promising on the growth and inflation fronts. However, the inflation reading, while moderating, serves as a negative signal for financial markets and the Federal Reserve’s interest rate outlook,” said Goss.
Supply managers were asked their assessment of national economic conditions. Approximately 58% of supply managers expect a 2023 recession.
Employment: The regional hiring gauge rose into the slow growth range for the third straight month to 52.2 from March’s 50.0 and February’s 52.8.
On average, 47.8% of supply managers reported an adequate number of applicants for job openings at their firm. On the other hand, approximately 13.0% reported significant shortages of applicants for job openings at their firm. The remaining 39.2% reported that the number of applicants and job openings were well-balanced.
Other April comments from supply managers were:
• “I see the oil markets trending downward which is a sign to me that a slowdown in the oil refining industry is happening. So I believe that we are in a recession that is going to get worse.”
• “Manufacturing is slow. Excess capacity and still excess inventory. Inflation is hurting consumers.”
• “I think we may already be in a recession.”
• “Sales have already dipped 4% but are holding steady. Barring any significant change from the Fed, it can be expected a little further dip will occur into summer, after which, regular seasonality effects will be the norm.”
• “A correction is inevitable. Problem statement – the federal government spends more money than they bring in every day. The federal government only looks at increasing taxes with no focus on spending control.”
• “We might have a soft landing.”
• “Beyond words!”
Wholesale Prices: The wholesale inflation gauge for the month cooled to a still too high 67.4 from March’s 77.1. According to Creighton’s surveys since the middle of 2022, wholesale inflationary pressures have waned significantly from last April’s 89.7 to today’s elevated level.
“Much like the recent expansion in wholesale price inflation at the national level, Creighton’s survey is pointing to waning input price pressures at the producer level (wholesale price index),” said Goss.
“As a result of elevated but cooling inflationary pressures at the wholesale level, I expect the Federal Reserve’s rate setting committee (FOMC) to announce a rate hike of 25 basis points (0.25%) at its May 2-3 meetings to combat inflation in the pipeline,” said Goss. “However, due to recent downturns in recorded inflationary pressures, I expect the Federal Reserve to announce that it will take a wait-and-see approach to rate hikes after the May increase.”
Confidence: Looking ahead six months, economic optimism, as captured by the April Business Confidence Index, slumped to a very weak 31.9 from 34.8 in March and 38.1 in February. “Approximately 45.4% of supply managers expect economic growth to decline in the next six months,” said Goss.
Inventories: The regional inventory index, reflecting levels of raw materials and supplies, fell to 54.3 from March’s 58.4. “Manufacturing firms have begun returning inventory to normal levels. This will support moderate sales growth in the months ahead,” said Goss.
Trade: Trade numbers were weak for April with export orders falling to 42.9 from 45.9 in March. Additionally, firms continued to report weak imports due to an anemic regional economy. The April import reading, which was below growth neutral at 47.0, indicated that imports declined but at a slower rate than March’s 39.5.
Other Survey Components: New orders climbed to 58.7 from 56.2 in March; the production or sales index rose to 60.9 from 52.1 in March; and the speed of deliveries of raw materials and supplies expanded to 47.9 from March’s 37.5. The increase indicates an uptick in supply chain disruptions and delivery bottlenecks for the month.
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.
Arkansas: The state’s April Business Conditions Index climbed to 52.4 from 48.8 in March. Components from the April survey of supply managers were: new orders at 59.0, production or sales at 60.2, delivery lead time at 45.5, inventories at 50.3 and employment at 47.0. According to U.S. Bureau of Labor Statistics data: between Quarter 1, 2022, and Quarter 1, 2023, Arkansas’s average manufacturing work week expanded by 2.6 hours and hourly manufacturing hourly wages climbed by 5.4%.
Iowa: The state’s Business Conditions Index for April rose to 55.8 from March’s 49.4. Components of the overall April index were: new orders at 61.0, production or sales at 58.3, delivery lead time at 51.0, employment at 53.3 and inventories at 55.4. According to U.S. Bureau of Labor Statistics data: between Quarter 1, 2022, and Quarter 1, 2023, Iowa’s average manufacturing work week fell by 0.3 hours and hourly manufacturing hourly wages climbed by 8.3%.
Kansas: The Kansas Business Conditions Index for April dropped to 49.7 from March’s 54.6. Components of the leading economic indicator from the monthly survey of supply managers for April were: new orders at 58.8, production or sales at 59.4, delivery lead time at 44.6, employment at 40.5 and inventories at 45.1. According to U.S. Bureau of Labor Statistics data: between Quarter 1, 2022, and Quarter 1, 2023, Kansas’ average manufacturing work week fell by 1.0 hour and hourly manufacturing hourly wages climbed by 9.6%.
Minnesota: The April Business Conditions Index for Minnesota improved to 54.2 from 46.0 in March. Components of the overall April index were: new orders at 59.2, production or sales at 60.6, delivery lead time at 46.0, inventories at 53.0 and employment at 52.3. According to U.S. Bureau of Labor Statistics data: between Quarter 1, 2022, and Quarter 1, 2023, Minnesota’s average manufacturing work week was unchanged and hourly manufacturing hourly wages climbed by 2.7%.
Missouri: The state’s April Business Conditions Index rose to 49.5 from 48.0 in March. Components of the overall index from the survey of supply managers for April were: new orders at 58.8, production or sales at 58.6, delivery lead time at 44.6, inventories at 45.1 and employment at 40.5. According to U.S. Bureau of Labor Statistics data: between Quarter 1, 2022, and Quarter 1, 2023, Missouri’s average manufacturing work week rose by 0.5 hours and hourly manufacturing hourly wages climbed by 5.3%.
Nebraska: For a fourth straight month, Nebraska’s Business Conditions Index climbed above the growth neutral threshold. The overall reading for April improved to 56.8 from 52.5 in March. Components of the index from the monthly survey of supply managers for April were: new orders at 61.5, production or sales at 59.5, delivery lead time at 47.0, inventories at 58.7 and employment at 57.3. According to U.S. Bureau of Labor Statistics data: between Quarter 1, 2022, and Quarter 1, 2023, Nebraska’s average manufacturing work week sank by 0.5 hours and hourly manufacturing hourly wages climbed by 3.3%.
North Dakota: The state’s Business Conditions Index climbed above growth neutral for April with a reading of 56.9, up from 44.8 in March. Components of the overall index for April were: new orders at 59.5, production or sales at 61.5, delivery lead time at 47.0, employment at 57.6 and inventories at 58.9. According to U.S. Bureau of Labor Statistics data: between Quarter 1, 2022, and Quarter 1, 2023, North Dakota’s average manufacturing work week expanded by 0.9 hours and manufacturing hourly wages climbed by 3.5%.
Oklahoma: Oklahoma’s Business Conditions Index dipped in April to a reading that was still above growth neutral. The April index declined to 54.5 from 55.3 in March. Components of the overall April index were: new orders at 59.2, production or sales at 60.8, delivery lead time at 46.2, inventories at 54.3 and employment at 51.9. According to U.S. Bureau of Labor Statistics data: between Quarter 1, 2022, and Quarter 1, 2023, Oklahoma’s average manufacturing work week expanded by 0.1 hours and hourly manufacturing hourly wages climbed by 5.9%.
South Dakota: The April Business Conditions Index for South Dakota climbed to a solid 56.7 from March’s 47.8. Components of the overall index from the April survey of supply managers in the state were: new orders at 59.4, production or sales at 61.5, delivery lead time at 46.9, inventories at 58.5 and employment at 57.2. According to U.S. Bureau of Labor Statistics data: between Quarter 1, 2022, and Quarter 1, 2023, South Dakota’s average manufacturing work week contracted by 1.4 hours and hourly manufacturing hourly wages climbed by 10.2%.
Survey results for April will be released on June 1, 2023, the first business day of the month.