Mid-America Index Climbs Above Growth Neutral for November:
Inflationary Pressures Down Again
November survey results at a glance:
- Leading economic indicator moves above growth neutral with lower inflationary pressures.
- Businesses reported slight job increases for November.
- Holiday buying is expected to expand by 3 to 4 percent from last year.
- Businesses expect wage rates to expand by only 2.2 percent over the next year.
For Immediate Release: December 2, 2013
OMAHA, Neb. – After declining in October to its lowest level since 2012, the monthly Mid-America Business Conditions Index, a leading economic indicator for a nine-state region, increased for November.
Overall index: The Business Conditions Index, which ranges between 0 and 100, rose to a tepid 51.2 from October’s growth neutral 50.0. “Weakness among nondurable goods manufacturers in the region were more than offset by strength among durable goods producers. The region’s heavy manufacturers reported solid upturns in new export orders for November,” said Ernie Goss, Ph.D., director of Creighton University’s Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics.
Employment: After falling below growth neutral for October, the region’s employment gauge expanded above the threshold for November. The index jumped to 51.2 from 48.2 in October. “After taking a hit from the government shutdown and the uncertainty surrounding raising the nation’s debt ceiling, firms in the region increased hiring slightly for the month. The lack of significant new hiring over the past several months will restrain growth in 2013 holiday buying,” said Goss.
“As a result of the weak job market, respondents expect a very modest 2.2 percent pay increase for next year or only slightly above the rate of inflation,” reported Goss.
Wholesale Prices: For a second straight month, the prices-paid index, which tracks the cost of purchased raw materials and supplies, declined. The wholesale inflation gauge dipped to 61.6 from October’s 63.1 and September’s 64.8.
"Inflationary pressures at the wholesale level continue to decline. This is likely to result in consumer prices growing at an annual pace significantly below the Federal Reserve’s target of approximately 2 percent for the next several months. While the inflation gauge remains in a range indicating only modest inflationary pressures, the Federal Reserve’s $85 billion monthly bond buying stimulus program continues to boost asset prices such as housing and stocks at rates that are not sustainable,” said Goss.
This month supply managers were asked how much they expected prices of products and services that they purchase to change in the next six months. More than one-fourth, or 27.5 percent, expect no change and maybe even a price decline. “There is clearly more downward pressure on wholesale prices than the Federal Reserve is comfortable with,” said Goss.
Confidence: Looking six months ahead, economic optimism, as captured by the November business confidence index, expanded to 57.2 from October’s 56.0. “The temporary resolution of the debt ceiling and the re-opening of the federal government had a positive impact on supply managers’ outlook,” said Goss.
For each of the last nine months, supply managers were asked how the federal spending sequestration was affecting their company. “As in past months, approximately two-thirds of supply managers indicated the cuts have had no impact to date. The remaining one-third of supply managers indicated that sequestration was having a modest impact. According to surveys over the last nine months, the impacts have been modest and have remained subdued,” said Goss.
Inventories: The inventory index tracking the level of raw materials and supplies sank to 48.1 from October’s 50.0. “Even with November’s decline, inventory levels are up from this time last year. This is another signal that supply managers are more upbeat about expanding sales for their companies in the months ahead,” said Goss.
“Based on inventory levels, confidence, hiring and overall business activity from our survey, I expect the holiday buying season to be up from last year, but it will not be a robust holiday buying season, with sales up between 3 and 4 percent from last year,” said Goss.
Trade: Trade numbers strengthened markedly for the month. The new export orders index jumped to 56.4 from 44.4 in October. The import index expanded to 53.5 from October’s 48.5. “One of the important factors slowing growth in the regional economy has been export orders. It is encouraging to record a sharp upturn in the reading. Furthermore, the November expansion pushed regional firms to step-up their buying from abroad. We will have to see several months of improvements like these before I am confident that trade numbers are solidly on the upswing,” said Goss.
Other components: Other components of the November Business Conditions Index were new orders at 57.2, up from 47.0 in October; production or sales at 53.3, up from October’s 51.2; and delivery lead time at 50.7, down from last month’s 53.0.
Survey results for December will be released on the first business day of next month, Jan. 2.
Follow Goss on twitter at http://twitter.com/erniegoss
For historical data and forecasts visit our website at: