Growth Outlook Improves for Mid-America in February:
West Coast Port Dispute Has Negative Impact
February survey results at a glance:
- The leading economic indicator climbed into the healthy range for the month.
- Approximately 44.9 percent of supply managers reported negative impacts from West Coast port dispute.
- Inflationary pressures cool again.
- Rate of new hiring expected to slow in 2015.
For Immediate Release: March 2nd, 2015
OMAHA, Neb. – The Creighton University Mid-America Business Conditions Index for January, a leading economic indicator for a nine-state region stretching from North Dakota to Arkansas, increased from January’s reading. Indices over the past several months are pointing to positive economic gains over the next three to six months for the region.
Overall index: The Business Conditions Index, which ranges between 0 and 100, rose to 57.0 from January’s 54.8. The regional index, much like the national reading, is pointing to improving growth for the first half of 2015.
“However, areas of the region linked closely to the energy sector, including ethanol, are experiencing pullbacks in economic activity,” 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: The regional employment gauge remained in a range indicating positive but slow growth for manufacturing and value-added services firms in the region. The job gauge fell to 50.8 from January’s 51.4. “While the job index stood above growth neutral for February, this was the second straight month that the reading has fallen. Businesses linked to agriculture and energy are laying off workers as firms outside these two sectors are expanding hiring at a positive pace,” said Goss.
More than one-third of supply managers, or 35.2 percent, expected new hiring for their firms in 2015. However this is down from 40.3 percent recorded last year at this time.
Wholesale Prices: In December of 2014, the prices-paid index, which tracks the cost of raw materials and supplies, declined to its lowest level in five years. The wholesale inflation index for February sank to 51.5 from January’s 54.9, but was up from December’s 50.8. “A strengthening U.S. dollar and significantly lower fuel prices have pushed inflationary pressures at the wholesale level lower over the past several months,” said Goss.
Supply managers reported they expect the 2015 prices for their company’s products and services to grow by 1.6 percent. This is down significantly from 2.6 percent recorded at this time in 2014.
Confidence: Looking ahead six months, economic optimism, as captured by the February business confidence index, decreased to 58.4 from January’s 61.8. “Improving economic expectations resulting from lower energy prices more than offset economic pessimism stemming from weakness among energy and energy-linked businesses,” said Goss.
Inventories: The inventory index, which tracks the change in the level of raw materials and supplies, jumped to 56.6 from 50.0 in January.
This month, supply managers were asked about the impact of the West Coast port dispute on their firm. Approximately 44.9 percent reported the port bottlenecks had a negative impact on their ability to purchase inputs of raw materials and supplies. The remaining 55.1 percent registered little or no impact from the shipping difficulties.
Trade: The new export orders index sank to 54.4 from 57.0 in January. The import index for February slipped to 52.7 from January’s 52.8. “Over the past six months, the value of the U.S. dollar has risen dramatically against the currencies of our chief trading partners. This movement has made US goods less competitively priced abroad and foreign goods more cheaply priced in the US. Despite this, the new export orders index were at a solid level for February. I do expect exports and new export orders to move lower in the months ahead,” said Goss.
Other components: Other components of the February Business Conditions Index were new orders at 57.1, down from 58.6 in January; production or sales expanded to 63.8 from January’s 60.5; and delivery speed of raw materials and supplies jumped to 56.7 from last month’s 53.4.
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 December will be released on the first business day of next month, April 1, 2015.
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