Mid-American Economy

Mid-America Manufacturing Advances Again: Half of Supply Managers Report Tariffs Making Purchasing More Difficult

February survey highlights:

  • The overall index rose to its highest level since August of last year.
  • Inflationary pressures cooled for the month. 
  • Approximately half, or 49.0 percent of supply managers, reported current tariffs and restrictions made it more difficult to purchase internationally.
  • Almost one-fourth of supply managers support raising tariffs even more on imported Chinese goods.
  • In 2018, the region exported approximately $5.2 billion in goods supporting almost 52,000 jobs in the region.  

OMAHA, Neb. (March 1, 2019): The February Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, rose to its highest level since September of last year signaling solid growth for the region over the next three to six months.

Overall index: The Business Conditions Index, which ranges between 0 and 100, climbed to 57.9 from January's 56.0. This is the 27th straight month the index has remained above growth neutral 50.0.

"The regional economy continues to expand at a positive pace. However, as in recent months, shortages of skilled workers and international trade tension/tariffs remain an impediment to even stronger growth. Surprisingly, almost one-fourth of supply managers support raising tariffs even more on the import of Chinese goods. An almost equal percentage support reducing tariffs on Chinese imports," 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: The February employment index expanded to a strong 59.0 from January's healthy 58.5.

"Overall manufacturing employment growth in the region over the past 12 months has been very healthy and exceeded that of the nation," said Goss. "I expect this gap to close in the months ahead as regional job growth slows more than national manufacturing job growth. Regional job growth for durable-goods producers has been approximately three times that of non-durable goods manufacturers over recent months."

Wholesale Prices: The wholesale inflation gauge continues to indicate softening inflationary pressures. The February price-index plummeted to 64.1 from January's 76.3.

Both Creighton's regional wholesale inflation index and the U.S. inflation gauge have weakened recently. While tariffs and expanding growth, for example, have boosted steel prices over the past 12 months, prices of other goods have pulled our inflation gauge, and the Federal Reserve's target rate below their objective. 

"I expect slowing growth to push both wholesale and consumer inflation lower even lower in the months ahead," Goss said. "Due to prices at the consumer level moving at an acceptable pace, I do not expect the Federal Reserve to raise interest before its September meetings," said Goss.

Confidence: Looking ahead six months, economic optimism, as captured by the February Business Confidence Index, advanced to 58.8 from January's 53.7.

"However, I expect business confidence to depend heavily on trade talks with China. Approximately half, or 49.0 percent, of supply manager reported that current tariffs and restrictions had made it more difficult for their firm to purchase internationally," reported Goss.

Inventories: Companies expanded inventories of raw materials and supplies for the month. The February inventory index increased slightly to 57.8 from January's 57.7.          

Trade: The regional trade numbers for February were solid with both imports and exports advancing. The new export orders index moved higher to a solid 55.6 from January's 48.3, and the import index expanded to 54.8 from 54.4 in January. "Despite higher tariffs on imported goods, healthy regional growth boosted imports for the month, as new export orders improved for the month," said Goss.  

Other survey components: Components of the Business Conditions Index were new orders at 55.3, down from January's 56.2; the production or sales index at 53.9, unchanged from January; and speed of deliveries of raw materials and supplies index at 63.8 and up sharply from last month's 53.8.     

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: The February Business Conditions Index for Arkansas rose to 56.6 from January's 54.6. Components of the index from the monthly survey of supply managers were new orders at 54.2, production or sales at 52.6, delivery lead time at 62.1, inventories at 56.7, and employment at 57.6. "Arkansas is estimated to have exported $351.8 million in goods to China for 2018, making it number six in the region. The exports to China supported approximately 3,500 jobs in Arkansas for 2018," said Goss.

Iowa: The February Business Conditions Index for Iowa expanded to 56.9 from January's 54.8. Components of the overall index from the monthly survey of supply managers were new orders at 55.5, production or sales at 52.2, delivery lead time at 50.9, employment at 58.9, and inventories at 56.3. "Iowa is estimated to have exported $561.8 million in goods to China for 2018, making it number four in the region. The exports to China supported approximately 5,600 jobs in Iowa for 2018," said Goss.

Kansas: The Kansas Business Conditions Index for February advanced to 55.2 from January's 53.3. Components of the leading economic indicator from the monthly survey of supply managers were new orders at 53.1, production or sales at 51.2, delivery lead time at 60.5, employment at 56.2, and inventories at 55.2. "Kansas is estimated to have exported $674.9 million in goods to China for 2018, making it number three in the region. The exports to China supported approximately 6,800 jobs in Kansas for 2018," said Goss.

Minnesota: The February Business Conditions Index for Minnesota declined to 53.4 from 54.5 in January. Components of the overall February index from the monthly survey of supply managers were new orders at 51.7, production or sales at 49.4, delivery lead time at 58.4, inventories at 53.2, and employment at 54.5. "Minnesota is estimated to have exported $1.9 billion in goods to China for 2018, making it number one in the region. The exports to China supported approximately 19,000 jobs in Minnesota for 2018," said Goss.

Missouri: The February Business Conditions Index for Missouri climbed to 57.0 from January's 55.0. Components of the overall index from the survey of supply managers were new orders at 54.5, production or sales at 53.0, delivery lead time at 62.6, inventories at 57.1, and employment at 58.0. "Missouri is estimated to have exported $888.7 million in goods to China for 2018, making it number two in the region. The exports to China supported approximately 8,900 jobs in Missouri for 2018," said Goss.

Nebraska: After dipping below growth neutral for December, the state's Business Conditions Index has moved above the threshold of 50.0. Nebraska's February overall index expanded to 52.4 from January's 50.5. Components of the index from the monthly survey of supply managers were new orders at 50.9, production or sales at 48.3, delivery lead time at 57.1, inventories at 52.1, and employment at 53.5. "Nebraska is estimated to have exported $462.0 million in goods to China for 2018, making it number five in the region. The exports to China supported approximately 4,600 jobs in Nebraska for 2018," said Goss.

North Dakota: The February Business Conditions Index for North Dakota increased to 51.6 from 49.8 in January. Components of the overall index were new orders at 50.3, production or sales at 47.6, delivery lead time at 56.2, employment at 52.7, and inventories at 51.3. "North Dakota is estimated to have exported $49.3 million in goods to China for 2018, making it number nine in the region. The exports to China supported approximately 500 jobs in North Dakota for 2018," said Goss.

Oklahoma: Oklahoma's Business Conditions Index has remained above the 50.0 threshold for the last 19 straight months. The overall index from a monthly survey of supply managers advanced to 58.1 from 57.1 in January. Components of the overall February index were new orders at 55.2, production or sales at 53.8, delivery lead time at 63.6, inventories at 58.0, and employment at 60.0. "Oklahoma is estimated to have exported $212.6 million in goods to China for 2018, making it number seven in the region. The exports to China supported approximately 2,100 jobs in Oklahoma for 2018," said Goss.

South Dakota: The February Business Conditions Index for South Dakota climbed to a regional high of 68.7 from January's 66.2, also a regional high. Components of the overall index from the  February survey of supply managers in the state were new orders at 63.7, production or sales at 64.6, delivery lead time at 76.3, inventories at 69.7, and employment at 69.2. "South Dakota is estimated to have exported $60.8 million in goods to China for 2018, making it number eight in the region. The exports to China supported approximately 600 jobs in South Dakota  for 2018," said Goss.

Survey results for March will be released on April 1, the first business day of the month