Growth Slows for Mid-America for November:
New Export Orders Jump Higher
November survey results at a glance:
- Leading economic indicator falls for the month.
- Hiring was weak but a lack of skilled workers to fill positions remains an issue.
- New export orders soar for the month.
- Wholesale pressures remain modest.
- Best holiday buying season since 2007 expected for the region.
For Immediate Release: December 1, 2014
OMAHA, Neb. – The Mid-America Business Conditions Index for November, a leading economic indicator for a nine-state region stretching from North Dakota to Arkansas, dipped slightly from October’s tepid reading. Indices over the past several months are pointing to positive, but slower, economic gains over the next three to six months for the region.
Overall index: The Business Conditions Index, which ranges between 0 and 100, declined to 51.3 from October’s 51.8. After rising to its highest level in more than three years in June, the overall reading has hovered in a range pointing to positive, but much slower, growth for the overall regional economy over the next three to six months.
“A stronger U.S. dollar, plentiful supplies and weak global demand have pushed agriculture and energy prices lower. While I still expect positive growth, it will be down from the same period for 2013. North Dakota and Oklahoma are experiencing the negative influence of sharply lower energy prices while the remaining seven states are experiencing the negative impacts of much weaker crop prices. Growth in urban areas of the region will outstrip that of non-urban areas of the region in the months ahead,” 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: For the third time in the past four months, the employment index remained below the growth neutral threshold of 50.0. However, the job gauge advanced to 49.4 from 43.1 in October. “Businesses linked to agriculture and energy are experiencing weaker hiring conditions. At the same time, shortages of skilled/qualified workers in many parts of the region are limiting business expansion,” said Goss.
This month 46 percent of supply managers reported the number of applicants exceeded the number of jobs available, while 28 percent indicated the number of jobs was greater than the number of applicants. The remaining 26 percent said the number of applicants and jobs were approximately equal. “The problem for regional businesses is that a high share of the applicants do not have the necessary skills or qualifications,” said Goss.
Wholesale Prices: For three of the past four months, the prices-paid index, which tracks the cost of raw materials and supplies, declined. The wholesale inflation index sank in November to 56.4, its lowest level since July 2012 and down from October’s 60.6. “A strengthening U.S. dollar and weaker global demand have pushed inflationary pressures at the wholesale level down over the past several months,” said Goss.
Confidence: Looking ahead six months, economic optimism, as captured by the November business confidence index, climbed to 61.5 from 61.2 in October. “Business optimism supported by improvements in the national labor market and cheaper fuel costs more than offset pessimism from weaker economic conditions in the regional energy and agriculture sectors,” said Goss.
Inventories: The inventory index, which tracks the level of raw materials and supplies, improved to 52.8 from October’s 51.4. “Supply managers expanded inventories for the month, and at a slightly faster pace than in October. This is yet another signal that supply managers remain reasonably 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 unexpectedly jumped to a solid 57.0 from 48.8 in October. The import index for November sank to 51.0 from October’s 52.9. “The significant increase in the value of the dollar this year has made U.S. goods less competitively priced abroad and increased the attractiveness of foreign goods sold in the U.S. Despite this, new export orders increased significantly for the month. At this point in time, I think this was an aberration. I expect new export orders to weaken in the months ahead,” said Goss.
Other components: Other components of the November Business Conditions Index were; new orders declined to 50.7 from 53.6 in October; production or sales fell to 52.2 from October’s 55.0; Delivery speed of raw materials and supplies slumped to 51.4 from last month’s 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 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, January 2, 2015.
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