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Mid-American Economy

Mid-America Index Improves but Confidence Plummets:
Supply Bottlenecks Reduced to Pre-Pandemic Levels 

October Survey Highlights:   

• The overall index or business barometer rose for only the second time in the past seven months but remained above growth neutral for the 29th straight month. 
• The wholesale inflation gauge fell to its lowest level in more than two years.
• Delivery lead times and supply bottlenecks dropped to their lowest levels since the pandemic began. 
• Business Confidence Index fell to lowest level since March 2020, the first month of the pandemic. 
• Monthly job gains for the region fell from 0.28% in Q2 to 0.09% in Q3.

OMAHA, Neb. (Nov. 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 for only the second time in the last seven months, and remained above growth neutral for the 29th 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, climbed to 53.1 from 52.7 in September.  

The Mid-America report is produced independently from the national ISM.

As stated by one supply manager, “Manufacturing is slow for this time of year. After holidays, expect major corrections.”

“Creighton’s monthly survey results indicate the region continues to add manufacturing activity, but at a slow pace with declining inflationary pressures. Supply chain disruptions eased further in October, 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 only a modest pace. The October employment index fell to 46.3 from 51.9 in September. More than one of four, or 25.9%, of supply managers indicated that the shortage of labor was the greatest challenge facing their firm for the next 12 months.  

According to U.S. Bureau of Labor Statistics data, monthly job gains for the region fell from 0.28% in the fiscal second quarter to 0.09% in the third quarter.

One supply manager reported that, “The lack of committed, passionate workers is a challenge.”
 

Other September comments from supply managers were:
• “Inflation is a tax.”
• “We are just on the front end of a pending recession regardless of who comes out ahead in the general (mid-term) elections.”

Wholesale Prices: The wholesale inflation gauge for the month softened to its lowest reading since August 2020. The inflation reading fell to 65.4 for October from 71.2 in September. “As global commodity prices have stabilized at lower levels, so has inflation. Even so, I expect the Federal Reserve to announce an interest rate hike of 75 basis points (0.75%) to combat inflation at its meeting today with another 50-basis point increase in December,” said Goss.

On average, supply managers expect prices for their firm’s inputs and supplies to rise by only 2.5% in the next six months. This is down significantly from the forecast just six months ago.  One supply manager reported that, “(I expect) purchased prices of commodities to correct down substantially.”

Supply chain managers were asked to identify the greatest fourth-quarter challenge in 2022. Approximately one-third named supply chain disruptions as the greatest challenge. This is down from 58.6% recorded two months earlier. 

Confidence: Looking ahead six months, economic optimism as captured by the October Business Confidence Index slumped to a very weak 18.5 from 25.9 in September. “Business Confidence Index fell to lowest level since March 2020, the first month of the pandemic,” said Goss. 

“Confidence indices for each month in 2022, all below growth neutral, are the worst string of readings since the 2008-09 recession,” said Goss.

Inventories: The regional inventory index, reflecting levels of raw materials and supplies, dropped to 57.8 from September’s 65.5. “Manufacturing firms continue to stockpile inventories to avoid supply chain disruptions,” said Goss.  

Trade: Despite supply chain bottlenecks and a very strong dollar, the export index rose to 52.9 from 44.5 in September and 43.8 in August. On the other hand, firms cut back on their imports with an import index of 35.0, down significantly from 50.1 in September.  

Other survey components of the September Business Conditions Index:

New orders jumped to 55.8 from 46.2 in September; the production or sales index climbed to 57.4 from 46.2 in September; and the speed of deliveries of raw materials and supplies declined to 48.1 from September’s 53.9. This lower reading indicates a reduction in supply chain disruptions and fewer delays for the month. October’s reading was the lowest recorded since January 2018.

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 October Business Conditions Index climbed above the growth neutral threshold for a second straight month to 58.5 from 58.4 in September. Components from the October survey of supply managers were: new orders at 58.5, production or sales at 57.7, delivery lead time at 52.3, inventories at 61.2 and employment at 66.0. The latest U.S. Bureau of Labor Statistics data indicate that monthly manufacturing job growth for the latest quarter compared to the previous quarter improved from 0.21% to 0.31%. 

Iowa: The state’s Business Conditions Index for October sank to 49.8 from September’s 50.9. Components of the overall October index were: new orders at 57.4, production or sales at 56.2, delivery lead time at 46.8, employment at 39.1 and inventories at 49.7. The latest U.S. Bureau of Labor Statistics data indicate that monthly manufacturing job growth deteriorated from 0.39% for Q2 to 0.19% for Q3.  

Kansas: The Kansas Business Conditions Index for October rose to 48.7 from September’s 48.0. Components of the leading economic indicator from the monthly survey of supply managers for October were: new orders at 57.0, production or sales at 56.1, delivery lead time at 46.3, employment at 36.7 and inventories at 47.5. The latest U.S. Bureau of Labor Statistics data indicate that monthly manufacturing job growth deteriorated from 0.40% for Q2 to 0.16% for Q3.  

Minnesota: The October Business Conditions Index for Minnesota climbed to a solid 53.5 from 53.2 in September. Components of the overall October index were: new orders at 57.7, production or sales at 56.7, delivery lead time at 48.5, inventories at 57.3 and employment at 47.4. The latest U.S. Bureau of Labor Statistics data indicate that monthly manufacturing job growth deteriorated from 0.37% for Q2 to 0.10% for Q3.  

Missouri: For a second straight month, Missouri’s Business Conditions Index climbed above growth neutral to 54.9 from 50.4 in September. Components of the overall index from the survey of supply managers for October were: new orders at 52.3, production or sales at 59.5, delivery lead time at 49.4, inventories at 61.4 and employment at 51.8. The latest U.S. Bureau of Labor Statistics data indicate that monthly manufacturing job growth deteriorated from 0.26% for Q2 to 0.05% for Q3.  

Nebraska: For a second consecutive month, Nebraska’s Business Conditions Index fell below growth neutral. The overall reading slumped to 43.2 in October from September’s 47.9. Components of the index from the monthly survey of supply managers for October were: new orders at 55.5, production or sales at 55.0, delivery lead time at 43.9, inventories at 36.8 and employment at 25.1. The latest U.S. Bureau of Labor Statistics data indicate that monthly manufacturing job growth deteriorated from +0.23% for Q2 to -0.26% for Q3.  

North Dakota: For a second straight month, the North Dakota Business Conditions climbed above growth neutral with an October reading of 57.5 from 55.0 in September. Components of the overall index for October were: new orders at 57.1, production or sales at 60.1, delivery lead time at 50.1, employment at 55.4 and inventories at 64.7. The latest U.S. Bureau of Labor Statistics data indicate that monthly manufacturing job growth improved from -0.25% for Q2 to +0.37% for Q3.  

Oklahoma: Oklahoma’s Business Conditions Index declined in October to a level indicating slow growth. The October index decreased to 51.3 from 55.6 in September. Components of the overall October index were: new orders at 56.4, production or sales at 57.9, delivery lead time at 47.4, inventories at 52.5, and employment at 42.2. The latest U.S. Bureau of Labor Statistics data indicate that monthly manufacturing job growth deteriorated from +0.25% for Q2 to -0.10% for Q3.  

South Dakota: The October Business Conditions Index for South Dakota expanded to 58.4 from 53.3 in September. Components of the overall index from the October survey of supply managers in the state were: new orders at 57.2, production or sales at 60.4, delivery lead time at 50.5, inventories at 66.6, and employment at 57.5. The latest U.S. Bureau of Labor Statistics data indicate that monthly manufacturing job growth improved from -0.30% for Q2 to -0.15% for Q3.

Survey results for November will be released on December 1, 2022, the first business day of the month.