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Mid-American Economy

Mid-America Index Falls but Remains in Growth Range:
Supply Chain Disruptions Named No. 1 Challenge for Businesses

August Survey Highlights:   

•    The overall index or business barometer fell in August but remained above growth neutral for the 27th straight month.
•    Employment expanded for the month. Approximately one-fourth of supply managers named labor shortages as their firm’s greatest 2022 challenge. 
•    Even though supply chain disruptions declined in August, almost 6 of 10 supply managers identified disruptions as the major business challenge for the rest of 2022. 
•    On average, manufacturing supply managers expect a raise of only 3.2% at their next review. This is down from 3.5% recorded last month. 

OMAHA, Neb. (Sept. 1, 2022) — The Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, rose above growth neutral for the 27th straight month. 

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, dropped to a solid 55.5 in August from July’s 59.8. The Mid-America report is produced independently from the national ISM.

“Creighton’s monthly survey results indicate the region continues to add manufacturing activity at a solid pace — with significant but declining inflationary pressures. Supply chain disruptions eased further in August, according to supply managers,” 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.  


Employment:

Despite healthy growth in monthly economic activity for almost two years, manufacturers in the region have added jobs at a modest pace. The employment index remained above growth neutral for the ninth straight month. That said, the index fell for the second straight month from 58.7 in July to 51.8 in August. Except for Arkansas, Missouri, Nebraska and South Dakota, non-farm employment levels, seasonally adjusted, remain below pre-pandemic levels for the five remaining states in the region.

This month, supply managers were asked to project their next yearly pay raise. “On average, manufacturing supply managers expect a raise of only 3.2%, which is down from 3.5% recorded last month,” said Goss. 

Notable August comments from supply managers were:

•    “The worst amendment is the 16th…”
•    “Long lead times seem to be the biggest issue with our supply chains.”
•    The Democrat Administration and Congress never seem to disappoint as they continue their path of destruction towards socialism and global power shift to China.”
•    “Supply chain issues are continuing to disrupt the flow of goods.” 

Wholesale Prices: The wholesale inflation gauge for the month declined to a still inflationary 76.0 from July’s 82.8. “This is an encouraging reading since it is the lowest wholesale inflation gauge since September 2020. As oil prices have stabilized at a lower level, so has inflation. Even so, I expect the Federal Reserve to announce an interest rate hike of 75 basis points (0.75%) at its Sept. 21 meeting to continue to combat inflation,” said Goss.

Supply chain managers were asked to identify the greatest challenge to business growth in 2022. Almost 6 of 10, or 58.6%, named supply chain disruptions. One supply manager reported that as a result of these disruptions, “I expect prices to go up and to continue to rise all year.”

Additionally, 24.1% of supply managers named labor shortages as their business’ top 2022 challenge, 10.4% reported higher inflation and 6.9% identified elevated interest rates.

According to the U.S. Bureau of Labor Statistics, commodity prices are up approximately 17.2% over the last 12 months with farm products advancing by 26.8%, metal products expanding by 7.5% and fuels soaring by 40.3% during this same time period.
 

Confidence: Looking ahead six months, economic optimism as captured by the August Business Confidence Index, increased to a very weak 32.2 from 26.8 in July. “Confidence indices for 2022, all below growth neutral, are the worst recorded since the 2008-09 recession,” said Goss.

Inventories: The regional inventory index, reflecting levels of raw materials and supplies, increased to 57.4 from July’s 57.2.  

Trade: Supply chain bottlenecks and a very strong dollar punished exports as the August export index fell to 43.8 from July’s healthy 61.8. On the other hand, the stronger dollar and regional manufacturing expansion pushed imports higher to 52.6 from July’s 45.5.  

Other survey components of the August Business Conditions Index: new orders slumped to 48.0 from 55.4 in July; the production or sales index increased to 56.0 from 55.4 in July; and the speed of deliveries of raw materials and supplies declined to 64.4 from July’s 72.5. This lower reading indicates a reduction in supply chain disruptions and fewer delays 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 Business Conditions Index for Arkansas fell below growth neutral for a third straight month, but the index increased to 49.6 in August from 46.4 in July. Components from the August survey of supply managers were: new orders at 44.6, production or sales at 54.0, delivery lead time at 56.8, inventories at 50.8 and employment at 42.0. “As a result of weakness in the state’s manufacturing sector, U.S. Bureau of Labor Statistics (USBLS) data show that hourly wages of manufacturing workers in the state have declined by 1.7% over the past 12 months,” said Goss.

Iowa: The state’s Business Conditions Index for August dropped to 55.7 from July’s 57.4. Components of the overall August index were: new orders at 57.3, production or sales at 56.1, delivery lead time at 58.8, employment at 49.0 and inventories at 57.2. “Durable goods manufacturers, including metal producers, are reporting solid growth. Non-durable goods producers including food processors reported healthy expansions. USBLS data indicate that average hourly manufacturing wages have expanded by 7.4% over the past 12 months,” said Goss.

Kansas: The Kansas Business Conditions Index for August declined to a solid 54.8 from July’s 56.5. Components of the leading economic indicator from the monthly survey of supply managers for August were: new orders at 52.5, production or sales at 53.9, delivery lead time at 56.8, employment at 60.2 and inventories at 50.7. “Durable goods producers, including machinery manufacturers, are reporting solid growth. Non-durable goods producers, including food processors, are reporting healthy growth. USBLS data indicate that average hourly manufacturing wages have expanded by a strong 11.3% over the past 12 months,” said Goss.

Minnesota: The August Business Conditions Index for Minnesota dropped to a healthy 64.3 from 68.8 in July. Components of the overall August index were: new orders at 45.8, production or sales at 58.4, delivery lead time at 73.2, inventories at 75.3 and employment at 68.8. “Durable goods manufacturers, including metal producers, are reporting solid growth. Non-durable goods producers, including food processors, are reporting healthy growth with USBLS wage data indicating that average hourly wages have expanded by 6.3% over the past 12 months,” said Goss.

Missouri: The August Business Conditions Index for Missouri dropped below growth neutral for a third straight month, but rose to 48.3 from July’s 47.3. Components of the overall index from the survey of supply managers for August were: new orders at 44.4, production or sales at 53.5, delivery lead time at 56.0, inventories at 48.3 and employment at 39.3. “Durable goods manufacturers, including metal producers, are reporting improving growth. Non-durable goods producers, including food processors, are reporting downturns in economic activity. USBLS data indicate that average hourly manufacturing wages have expanded by 8.7% over the past 12 months,” said Goss.

Nebraska: Nebraska’s overall index for August sank to 53.6 from 62.4 in July. Components of the index from the monthly survey of supply managers for August were: new orders at 44.9, production or sales at 55.3, delivery lead time at 59.1, inventories at 58.3 and employment at 58.3. “Durable goods manufacturers, including metal producers, are reporting solid growth. Non-durable goods producers, including food processors, are reporting slow growth. USBLS data indicate that average hourly manufacturing wages have expanded by a very strong 14.2% over the past 12 months,” said Goss.

North Dakota: The August Business Conditions Index for North Dakota fell below growth neutral for a third consecutive month to 48.8 but rose from July’s reading of 47.8. Components of the overall index for August were: new orders at 44.5, production or sales at 53.7, delivery lead time at 56.3, employment at 40.2 and inventories at 49.2. “Durable goods manufacturers are reporting positive growth. On the other hand, non-durable goods manufacturers, including food processors, are reporting pullbacks in economic activity. USBLS data indicate that average hourly manufacturing wages have expanded by a weak 4.4% over the past 12 months,” said Goss. 

Oklahoma: Oklahoma’s Business Conditions Index declined in August to a level indicating still healthy growth. The August index decreased to 60.7 from 63.2 in July. Components of the overall August index were: new orders at 45.3, production or sales at 59.7, delivery lead time at 74.3, inventories at 65.7 and employment at 58.3. “Durable goods manufacturers, including metal producers, are reporting solid growth, but with current employment, seasonally adjusted, below pre-pandemic levels. Non-durable goods producers, excluding food processors, are reporting solid growth. USBLS data indicate that average hourly manufacturing wages have expanded by 5.5% over the past 12 months,” said Goss. 

South Dakota:

The August Business Conditions Index for South Dakota decreased to 60.5 from 68.6 in July. Components of the overall index from the August survey of supply managers in the state were: new orders at 45.6, production or sales at 57.7, delivery lead time at 63.2, inventories at 71.5, and employment at 64.6. “Durable goods and non-durable goods are reporting slower growth in economic activity and jobs. On the other hand, USBLS data indicate that manufacturing wage growth over the past 12 months at 9.9% has been strong,” said Goss.

Survey results for October will be released on October 3, 2022, the first business day of the month.