Export Orders Push Mid-America Leading Indicator Higher:
Job Losses Recorded for the Month
August survey results at a glance:
- Leading economic indicator rose to a healthy reading for the month.
- Four in 10 businesses reported job openings exceeded job applicants.
- New export orders continued expanding at a healthy pace.
- Inflationary pressures declined.
- Shipping bottlenecks surfaced across the region.
For Immediate Release: September 2, 2014
OMAHA, Neb. – The Mid-America Business Conditions Index for August, a leading economic indicator for a nine-state region stretching from North Dakota to Arkansas, rose slightly from July’s healthy reading. Indices over the past several months are pointing to solid, but not spectacular, economic gains over the next three to six months for the region.
Overall index: The Business Conditions Index, which ranges between 0 and 100, improved to 57.2 from July’s 57.0. “After rising to its highest level in more than three years in June, the overall reading has hovered in a range pointing to positive growth for the overall economy and the job market over the next three to six months.”
“Anecdotally, supply managers are reporting more and more supply shipment delays as the overall economy improves. One supply manager complained that rail shipping had become particularly problematic as shipments of energy products and housing inputs have begun to take up shipping space,” 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 employment index fell below growth neutral for the first time in 2014. The employment gauge slumped to 48.7 from July’s 53.8 and 61.4 in June, which was a two-year high. “Businesses linked to agriculture lost jobs for the month. Furthermore, job growth in the region has lagged that of the nation for 2014. However, this growth has varied significantly across the region with North Dakota, Missouri and South Dakota above the national average and the remaining states below the U.S average,” said Goss.
Approximately 40 percent of supply managers indicated that in terms of hiring new workers at their firms, there were more job openings than job applicants. More than one in five, or 22 percent, reported that the number of applicants and the number of openings were about equal. The remaining 38 percent of respondents indicated that they had more job applicants than job openings.
Wholesale Prices: The prices-paid index, which tracks the cost of raw materials and supplies, declined for the month. The wholesale inflation index sank to 66.7 from July’s 67.6 and June’s much higher 73.5. Inflationary pressures at the wholesale level have recently cooled a bit.
“This month we asked supply managers how much they expected the prices of products they purchased to rise in the next six months. On average, supply managers anticipate a gain of approximately 2.2 percent. This estimate is below the 2.4 percent reported by supply managers in April of this year when we asked this same question. Thus, after a period of advancing inflationary pressures, we are now seeing those pressures diminishing,” said Goss.
Confidence: Looking ahead six months, economic optimism, as captured by the August business confidence index, climbed slightly to 60.4 from 60.0 in July. “Despite growing global tensions, and weaker numbers out of agriculture, improvements in the national and regional job market supported supply managers’ business outlook,” said Goss.
Inventories: The inventory index, which tracks the level of raw materials and supplies, jumped to 57.9 from July’s 51.3. “This is yet another signal that supply managers remain reasonably upbeat about the economy, as they also increased inventories in anticipation of expanding sales for their companies in the months ahead,” said Goss.
Trade: The new export orders index expanded to 59.8 from 57.5 in July. The import index for August fell to 51.8 from July’s 57.7. “It is an encouraging signal to track very healthy export readings as new export orders grew for a ninth straight month. Exports remain an important source of growth for the region. At the same time, firms in the region continued to purchase from abroad in expectations of upturns in company sales in the weeks and months ahead,” said Goss.
Delivery speed. The delivery lead time index popped to 60.6, its highest level in more than three years, and well up from July’s 53.7. “As a result of rapidly expanding shipments in the region, supply managers are having increasing difficulty in obtaining timely delivery of raw materials and supplies,” said Goss.
Other components: Other components of the August Business Conditions Index were new orders at 58.1, down from 61.5 in July; production or sales at 60.7, down from July’s 65.0; and delivery lead time popped to 60.6 from last month’s 53.7.
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 July will be released on the first business day of next month, October 1st.
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