Mid-America Business Conditions Index Rises to Healthy Level
The October Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Arkansas to North Dakota, climbed to a reading pointing to healthy economic growth ahead, according to the latest monthly survey results.
Overall index: The Business Conditions Index, which ranges between 0 and 100, rose to 58.8, its highest reading in four months and up from 58.2 in September. This is the 11th straight month the index has remained above growth neutral, continuing to point to positive growth for the region over the next three to six months.
"Both the national and our regional indices indicate the manufacturing sector is expanding at a very healthy pace and that this expansion will spill over into the broader national and regional economies in the next three to six months. For the first time in years, we are not tracking consistent growth in the durable goods sector," said Ernie Goss, PhD, director of Creighton Universitys Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics in the Heider College of Business.
Employment: The October employment index remained above growth neutral with a reading of 52.9 from Septembers 52.0. "The durable, nondurable and nonmanufacturing sectors are adding jobs at a solid pace. Energy firms, and manufacturers tied to energy, are expanding at a strong pace across the region. With the recent boost in employment growth, total regional employment growth (year over year) is now 1.3 percent, equal to the nations 1.3 percent gain over the same time period," said Goss.
Wholesale Prices: After surging for September, the regional wholesale inflation gauge cooled to a still lofty 75.0 from Septembers six year high of 79.6, continuing to indicate elevated regional inflationary pressures at the wholesale level.
"Given elevated inflationary reading from our surveys and government surveys over the past several months, I expect the Federal Reserve to raise short term interest rates next month. This increase will not dampen economic activity in the region to any great extent," said Goss.
Confidence: Looking ahead six months, economic optimism, as captured by the October business confidence index, expanded to a strong 63.8 from 63.6 in September. "Healthy profit growth, still low interest rates, and an improving global economy boosted the economic outlook among supply managers in the nine-state region," reported Goss.
Inventories: The October inventory index, which tracks the change in the level of raw materials and supplies advanced to 56.1 from Septembers 53.0.
Trade: The regional new export orders index was unchanged from Septembers solid 54.3, and the import index jumped to 58.6 from 53.8 in September. "Expanding regional growth spurred purchases of inputs from abroad, while growth among important trading partners maintained the export orders at a positive level," said Goss. As stated by one supply manger, "The weaker dollar (is) helping exports."
This month supply managers were asked about buying and selling abroad. Approximately half of respondents indicated that purchasing from abroad was important to their firms current growth. Additionally, almost one in five reported that NAFTA was important for both buying inputs and selling products
Other components: Components of the October Business Conditions Index were new orders at 61.3 from 62.5 in September; production or sales index was unchanged from Septembers 67.4; and delivery speed of raw materials and supplies expanded slightly to 56.5 from last months 56.0.
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 groups 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 October overall index for Arkansas fell to a solid 55.4 from Septembers 67.3. Components of the index from the monthly survey of supply managers were new orders at 57.4, production or sales at 63.4, delivery lead time at 52.7, inventories at 52.1, and employment at 51.1. Over the past 12 months, Arkansas increased manufacturing employment by 3 percent, or approximately 4,700 manufacturing jobs. Slight job losses for durable-goods producers were more than offset by gains for nondurable goods manufacturers, said Goss.
Iowa: The October Business Conditions Index for Iowa sank to a still healthy level of 55.0 from 60.7 in September. Components of the overall index from the monthly survey of supply managers were new orders at 58.4, production or sales at 62.3, delivery lead time at 55.4, employment at 47.8, and inventories at 51.0. Over the past 12 months, Iowa increased manufacturing employment by 1.3 percent, or approximately 2,800 manufacturing jobs. Nondurable goods producers, including food manufacturers expanded, while durable-goods manufacturers, including metal producers, contracted slightly, said Goss.
Kansas: The Kansas Business Conditions Index for October soared to 63.4 from Septembers regional low 43.6. Components of the leading economic indicator from the monthly survey of supply managers were new orders at 68.3, production or sales at 73.8, delivery lead time at 61.6, employment at 54.2, and inventories at 59.2. Our survey for the month indicated a significant improvement for the month. Nondurable goods producers expanded at a solid pace while durable goods experienced slight losses, said Goss.
Minnesota: The October Business Conditions Index for Minnesota declined to a still strong 56.3 from Septembers 59.4. Components of the overall October index from the monthly survey of supply managers were new orders at 59.9, production or sales at 64.0, delivery lead time at 53.3, inventories at 52.7, and employment at 51.7. Over the past 12 months, Minnesota expanded both durable and nondurable goods manufacturing. Gains were strong for food processors and medical equipment manufacturers, said Goss.
Missouri: The October Business Conditions Index for Missouri sank to 53.8 from 63.9 in September. Components of the overall October index from the survey of supply managers were new orders at 56.2, production or sales at 62.3, delivery lead time at 51.4, inventories at 51.1, and employment at 47.9. Over the past 12 months, Missouri increased manufacturing employment by 1.5 percent, or approximately 4,000 manufacturing jobs. Strong gains were recorded by both durable goods producers, including vehicle manufacturers, said Goss.
Nebraska: The October Business Conditions Index for Nebraska rose to 60.1 from 59.3 in September. Components of the index from the monthly survey of supply managers were new orders at 61.5, production or sales at 67.5, delivery lead time at 56.9, inventories at 59.9, and employment at 54.6. Over the past 12 months, Nebraska increased manufacturing employment by 1.1 percent, or approximately 1,100 manufacturing jobs. Food processors experienced solid gains, said Goss.
North Dakota: North Dakotas overall, or Business Conditions Index, declined, but remained above growth neutral for the month. The index for October from a survey of supply managers fell to 55.9 from 63.9 in September. Components of the overall index were new orders at 58.1, production or sales at 64.1, delivery lead time at 53.4, employment at 51.4, and inventories at 52.7. After declining for much of 2016, North Dakotas mining and energy sector began to expand in the first quarter of this year. Surveys over the past several months indicate this expansion continues at a brisk pace, said Goss.
Oklahoma: After falling below growth neutral for July, Oklahomas Business Conditions Index rose above the 50.0 threshold for the last three months. The overall index from a monthly survey of supply managers climbed to a robust 63.0 from 62.7 in September. Components of the overall October index from a survey of supply managers in the state were new orders at 65.2, production or sales at 70.8, delivery lead time at 60.9, inventories at 59.2, and employment at 58.9. Expansions among energy firms, and manufacturing companies linked to energy are driving the states economy forward at a current brisk pace. Food processors and machine manufacturers are growing at a solid pace, said Goss.
South Dakota: The Business Conditions Index for South Dakota soared to 57.6 from Septembers weak 46.6. Components of the overall index from the October survey of supply managers in the state were new orders at 60.3, production or sales at 66.1, delivery lead time at 55.7, inventories at 54.7, and employment at 51.3. While the states manufacturing sector is expanding at a tepid pace, energy related firms are advancing at a solid pace. Food processing is growing at a solid and positive pace, said Goss.
Survey results for November will be released on Dec. 1, the first business day of the month.
Story source: creighton.edu