Mid-American Economy

Mid-America Economic Growth Slows as Confidence Plunges: Higher Prices and Empty Shelves to Greet Holiday Shoppers

September survey highlights:

  • Creighton’s regional Business Conditions Index climbed into a range indicating positive, but slowing growth for the next three to six months.
  • Business confidence plummeted to its lowest level since the first month of COVID-19, March 2020.
  • Almost 73.3%, of supply managers expect holiday and Christmas shoppers to face significantly higher prices and empty shelves this season.
  • Approximately one in three supply managers said finding and hiring qualified workers will be the greatest challenge for the next 12 months, up from one in five last month.
  • Supply bottlenecks slammed regional imports lower.

OMAHA, Neb. (Oct. 1, 2021) – Since declining to a record low in April of last year, the Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, has remained above growth neutral for 16 of the last 17 months.

Overall index: The Business Conditions Index, which uses the identical methodology as the national ISM, ranges between 0 and 100, declined to a still solid 61.6 from August’s 68.9. Supply managers reported that worker shortages represented the greatest challenge for the next 12 months and was restraining growth.

“Creighton’s monthly survey results indicate the region is adding manufacturing business activity at a positive pace, and that regional growth will remain solid, but somewhat slower. Supply chain bottlenecks and labor shortages remain the primary obstacles to growth,” 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.  

“Almost three of four, or 73.3%, of supply managers expect holiday and Christmas shoppers to face significantly higher prices and empty shelves this season. The message from supply managers is to order early,” said Goss.

As reported by one supply manager, “Critical supplies are now on allocation for the first time in decades.”

Employment: The regional employment index remained above growth neutral for September, but sank to 56.7 from August’s 64.6. “Even with strong manufacturing job growth, the region has yet to recover all job losses from the pandemic. The latest U.S. Bureau of Labor Statistics data indicate that current regional nonfarm employment is down by 472,000 jobs, or 3.4%, compared to pre-COVID-19 levels,” said Goss.

“Average hourly wages for all manufacturing workers in MidAmerica expanded by 2.6% over the last 12 months compared to a stronger 3.0% for the same period between 2019 and 2020,” said Goss.

Even with solid job growth for the month, firms continue to report difficulties in finding and hiring new workers. Approximately one in three supply managers said finding and hiring qualified workers will be the greatest challenge for the next 12 months. “This is up from one in five from the previous month that expected labor shortages to be a top challenge,” said Goss.

Other September comments from supply mangers were:

“Complex supply issues. USA should be able to muddle through the holidays. Markets and economy may contract significantly next year.”

“Speechless with a side of ‘I told you so nine months ago.’ This administration will kill America as we know it and not for the better.”

“Concerns about the world relationships will play into the economy.”

Wholesale Prices: The wholesale inflation gauge for the month slipped to 94.9 from August’s 95.0. “Creighton’s monthly survey is tracking the highest and most consistent inflationary pressures in more than a quarter of a century of conducting the survey,” said Goss.

As reported by supply managers, rising input prices represented the third greatest challenge or threat faced by their firm over the next 12 months.

“Commodity prices are up approximately 19.9% over the last 12 months, according to U.S. Bureau of Labor Statistics data. Supply managers in Creighton’s June survey expect prices for their firm’s products to advance by 7.7% for the next 12 months,” said Goss.

Confidence: Looking ahead six months, economic optimism, as captured by the September Business Confidence Index, plummeted to 37.0. its lowest level since the onset of COVID-19 in Quarter 1, 2020, and down from 53.5 in August. This is the fourth straight month that the index has declined.

Inventories: The regional inventory index, reflecting levels of raw materials and supplies, sank to 48.3 from 54.9 in August.

Approximately 32% of supply managers indicated supply chains bottlenecks represented their firm’s greatest threat for the next 12 months.

Trade: Despite supply chain bottlenecks, regional export numbers were solid for the month. The new export orders index declined to a solid 59.5 from August’s 64.7. Supply bottlenecks pushed the September import reading to a lower 37.0 from 52.4 in August.

Other survey components: Other survey components of the September Business Conditions Index were: new orders fell to 64.4 from 75.8 in August; the production or sales index declined to 55.2 from August’s 65.0; and the index reading for the speed of deliveries of raw materials and supplies dipped to 83.4 from August’s 84.5. A lower reading indicates more timely deliveries.

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 (ISM), formerly the National Association of Purchasing Management. The Mid-America report is produced independently of the national ISM.

Arkansas: The September Business Conditions Index for Arkansas declined to 60.0 from 69.3 in August. Components from the September survey of supply managers were: new orders at 64.1, production or sales at 54.4, delivery lead time at 81.7, inventories at 44.8, and employment at 54.8. “Average hourly wages for all manufacturing workers in Arkansas expanded by 4.9% over the last 12 months compared to 2.4% for the same period between 2019 and 2020,” said Goss.

Iowa: Iowa’s Business Conditions Index for September dropped to 62.8 from 68.2 in August. Components of the overall September index were: new orders at 64.6, production, or sales, at 55.6, delivery lead time at 84.4, employment at 58.0, and inventories at 51.1. “Average hourly wages for all manufacturing workers in Iowa expanded by 1.7% over the last 12 months compared to 2.4% for the same period between 2019 and 2020,” said Goss.

Kansas: The Kansas Business Conditions Index for September declined to 62.0 from 70.4 in August. Components of the leading economic indicator from the monthly survey of supply managers were: new orders at 64.5, production or sales at 55.3, delivery lead time at 83.6, employment at 57.1, and inventories at 49.3. “Average hourly wages for all manufacturing workers in Kansas expanded by 2.2% over the last 12 months compared to 1.7% for the same period between 2019 and 2020,” said Goss.

Minnesota: The September Business Conditions Index for Minnesota dropped to 68.5, a regional high for this month, from August’s 71.1. Components of the overall September index were: new orders at 65.7, production or sales at 58.1, delivery lead time at 90.1, inventories at 64.2, and employment at 64.5. “Average hourly wages for all manufacturing workers in Minnesota expanded by 2.4% over the last 12 months compared to 5.6% for the same period between 2019 and 2020,” said Goss.

Missouri: The September Business Conditions Index for Missouri rose to 61.4 from 75.2 in August. Components of the overall index from the survey of supply managers for September were: new orders at 64.4, production or sales at 55.1, delivery lead time at 83.1, inventories at 48.0, and employment at 56.4. “Average hourly wages for all manufacturing workers in Missouri expanded by 2.2% over the last 12 months compared to 3.4% for the same period between 2019 and 2020,” said Goss.

Nebraska: Nebraska’s overall index for September sank to 65.5 from 68.6 in August. Components of the index from the monthly survey of supply managers for September were: new orders at 65.1, production or sales at 56.8, delivery lead time at 87.1, inventories at 57.2, and employment at 61.1. “Average hourly wages for all manufacturing workers in Nebraska expanded by 1.1% over the last 12 months compared to 5.2% for the same period between 2019 and 2020,” said Goss.

North Dakota: The September Business Conditions Index for North Dakota slumped to 55.7, a regional low, from 63.6 in August. Components of the overall index for September were: new orders at 63.3, production or sales at 52.6, delivery lead time at 77.4, employment at 50.0, and inventories at 35.1. “Average hourly wages for all manufacturing workers in North Dakota expanded by 4% over the last 12 months compared to 0.7% for the same period between 2019 and 2020,” said Goss.

Oklahoma: Oklahoma’s Business Conditions Index expanded above growth neutral in September. However, the overall index sank to 58.6 from 68.4 in August. Components of the overall September index were: new orders at 63.9, production or sales at 53.9, delivery lead time at 80.3, inventories at 41.8, and employment at 53.3. “Average hourly wages for all manufacturing workers in Oklahoma expanded by 5.3% over the last 12 months compared to 1.4% for the same period between 2019 and 2020,” said Goss.

South Dakota: The September Business Conditions Index for South Dakota fell to 59.6 from 67.3 in August. Components of the overall index from the September survey of supply managers in the state were: new orders at 64.0, production or sales at 54.3, delivery lead time at 81.3, inventories at 43.9, and employment at 54.4. “Average hourly wages for all manufacturing workers in South Dakota expanded by 3.5% over the last 12 months compared to 1.3% for the same period between 2019 and 2020,” said Goss.

Survey results for October will be released on Nov. 1, 2021, the first business day of the month.