Extreme Weather Pushes Mid-America Index Lower:
Inflation Highest in Two Years
February survey results at a glance:
- Leading economic indicator declines slightly but continues to point to growth for the next three to six months.Durable goods manufacturers and business services firms add jobs at a healthy pace.
- Almost one-third of supply managers reported recent extreme weather had a negative impact on February sales.
- Inflationary pressures rise to highest level in two years.
- Approximately one in 10 firms expects positive sales impacts from the recently passed farm bill.
For Immediate Release: Mar. 3, 2013
OMAHA, Neb. – The Mid-America Business Conditions Index for February, a leading economic indicator for a nine-state region stretching from North Dakota to Arkansas, points to positive growth in the next three to six months.
Overall index: The Business Conditions Index, which ranges between 0 and 100, dipped slightly to 57.4 from January’s 57.7. This month supply managers were asked how much the February weather affected their company’s business. “Almost one-third, or 32.4 percent, indicated that recent extreme weather had a negative impact on company sales. Only 5.4 percent reported positive impacts with the remaining 62.2 percent indicating little or no impact. Despite negative fallout from severe weather, supply managers, especially those in durable and nondurable manufacturing, reported healthy business activity for the first two months of 2014,” 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.
Employment: After declining below growth neutral for December, the employment gauge has remained above the threshold for the second straight month, though it did decline in February. The employment index dipped slightly to a still solid 55.6 from 56.4 in January. “Despite some weather-related job losses for the month, healthy gains were recorded for both manufacturing and value-added business services. Metal manufacturers continue to expand. Even though growth has slowed in the farm sector, agriculture-equipment manufacturers are experiencing healthy growth stemming from sales abroad,” said Goss.
This month supply managers assessed how the recently passed farm bill would affect company sales. Approximately 10.9 percent expect positive impacts while 6.8 percent anticipate negative impacts. The remaining 82.3 percent expect little or no sales impacts from the recently passed farm bill.
Wholesale Prices: The prices-paid index, which tracks the cost of raw materials and supplies, increased to its highest level in almost two years. The wholesale inflation gauge expanded to 75.7 from 71.6 in January.
"After remaining weak for most of the last year, inflationary pressures at the wholesale level are once again expanding at a faster, but still modest, pace. While the Federal Reserve has announced that it intends to scale back its bond buying program, termed QE3, by another $10 billion in March, I expect the Fed to begin scaling this program more aggressively in the months ahead as inflationary pressures rise at a somewhat faster pace,” said Goss.
Confidence: Looking six months ahead, economic optimism, as captured by the February business confidence index, declined to a strong 59.7 from January’s 62.2. “As in previous months, modest improvements in regional employment, moderate inflation and less D.C. political turmoil, supported supply managers’ business outlook for the month,” said Goss.
Inventories: The inventory index, which tracks the level of raw materials and supplies, expanded to 59.7 from January’s 53.2. “This is yet another signal that supply managers are more upbeat about the economy as they increased inventories in anticipation of expanding sales for their companies in the months ahead,” said Goss.
Trade: The new export orders index climbed to a 55.4 from 54.9 in January. The import index for February was unchanged from 52.4 in January. “It is a very encouraging signal to track a fourth straight month of healthy new export orders. At the same time, firms in the region continued purchasing from abroad in expectations of upturns in company sales in the weeks and months ahead,” said Goss.
Other components: Other components of the February Business Conditions Index were new orders at 53.4, down from 58.5 in January; production or sales at 61.7, down from 64.7 in January; and delivery lead time at 56.8, up from January’s 55.6.
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.
Survey results for March will be released on the first business day of next month, April 1.
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