Mid-American States

Mid-America Leading Economic Indicator Expands:
Price Pressures Plummet

Watch Dr. Goss Review of March's Results

April survey results at a glance:

• Leading economic indicator stays in very healthy range.
• Exports remain important contributor to growth.   
• Inflation cools significantly for the month.
• Input prices expected to expand by a low 2.1 percent for rest of 2012.
• More than one-third indicated that regulatory burdens were biggest obstacle to growth.

For Immediate Release: May 1, 2012
OMAHA, Neb. – The monthly Business Conditions Index for the nine-state, Mid-America region indicates growing strength in the regional economy.  The index, a leading economic indicator from a monthly survey of supply managers, has increased for five straight months.     

Overall index: The index, which ranges between 0 and 100, climbed to 60.0 from 58.6 in March and 58.4 in February.  “Despite higher energy prices, manufacturers, especially those tied to international markets and agriculture expanded briskly for the month.  Heavy manufacturing continues to be source of growth for the region with export oriented manufacturers leading the way,” said Ernie Goss, director of Creighton’s Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics.

This month supply managers were asked what federal action would most positively affect their company’s growth.  “More than one-third, 36 percent, reported that a reduction in regulatory burdens would be the most beneficial to expanding sales and income.  Another 26 indicated that a reduction in federal spending would be most supportive to growth for their industry while 15 percent said a corporate tax reduction would have the most positive impact on growth.  No other factor garnered above single digit support,” said Goss. 

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 by the National Institute for Supply Management, formerly the Purchasing Management Association, since 1931.

Employment: For a fourth straight month, the employment index climbed above growth neutral. The hiring gauge increased to a strong 62.1 from March’s 58.5. “Employment growth in the region is accelerating.  I expect the region to report the strongest employment growth since the recession ended in 2009 in the months.  This is in stark contrast to most other regional and national surveys that point to slower growth ahead,” said Goss.

Wholesale Prices: The prices-paid index, which tracks the cost of raw materials and supplies, plummeted to 67.8 from March’s 76.5. “Even as prices for certain inputs continue to grow at an unsustainable pace, this pullback in overall input prices is very good news.  This month, we asked supply managers to project price hikes for the rest of 2012 for inputs that they buy.  Supply managers anticipate a very modest 2.1 percent increase for the rest of the year.  Approximately 38 percent of supply managers expect no increase or a price decline for inputs for the remainder of 2012.  This downturn is certainly surprising to me potentially stemming from a national and global economic slowdown,” said Goss.  

Confidence: Looking ahead six months, economic optimism, as captured by the April business confidence index, rose to a healthy 64.5 from March’s 62.2.  “A dip in fuel prices and expanding regional growth more than offset concerns surrounding the nation’s employment conditions,” said Goss.

Inventories:  The April inventory index declined to 56.7 from 58.9 in March though it was up from February’s 54.2. “In anticipation of production increases in the months ahead, supply managers have been growing their inventories at a steady pace in the past several months.  I expect this to continue to be a source of growth for the next three to six months,” said Goss.  

Trade: April’s export numbers for the Mid-America region expanded to a solid 57.0 from 56.4 in March and 55.3 in February. At the same time, April imports slipped to 56.7 from March’s 57.4.  “Exports continue to be one of the most important factors driving growth in the regional economy higher.  Short of trading skirmishes or a strong dollar, I expect exports to remain healthy for most areas of the nine-state region,” said Goss.   

Other components: Other components of the April Business Conditions Index were new orders at 64.0, up from 60.8 in March; production or sales at 61.3, up from 60.4; and delivery at 56.1, up from 54.5 in March.

Survey results for May will be released June 1.

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For historical data and forecasts visit our website at:
http://www2.creighton.edu/business/economicoutlook/