Growth in Exports Slows Mid-America Economy:
Supply Delivery Bottlenecks Grow
September survey results at a glance:
- Leading economic indicator was down for the month.
- Businesses expect health insurance costs to rise by 7.2 percent for 2015. Approximately one in six businesses anticipates growth of more than 15 percent.
- Almost half of businesses reported increasing shipping bottlenecks.
- Inflationary pressures at wholesale level decline for a third straight month.
- New export orders grow, but at a much slower pace compared to August.
For Immediate Release: October 1, 2014
OMAHA, Neb. – The Mid-America Business Conditions Index for September, a leading economic indicator for a nine-state region, stretching from North Dakota to Arkansas, declined from August’s healthy reading. Indices over the past several months are pointing to solid, 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, fell to 54.3 from August’s 57.2. 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 slower, growth for the overall regional economy over the next three to six months.
“A 30 percent decline in grain prices over the past year has produced a pullback in economic activity for regional businesses linked to agriculture,” 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 falling below growth neutral for August, the employment index once again moved above this threshold. The job gauge expanded in September to 53.5 from August’s 48.7. “Even though the index was up for the month, job growth for the region has slowed from earlier in the year,” said Goss. “Regional job growth for the last 12 months ending in August was approximately 1.2 percent which is down from 1.5 percent recorded in January of this year.”
“Furthermore, average weekly earnings for the region expanded by only 1.6 percent over the past 12 months ranging from -1.3 percent for Missouri to 3.9 percent for Kansas,” said Goss.
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 60.1 from August’s 66.7. This is the third straight month that the inflation gauge has moved lower. Inflationary pressures at the wholesale level have cooled significantly over the past several months.
Confidence: Looking ahead six months, economic optimism, as captured by the September business confidence index, dipped slightly to 59.6 from 60.4 in August. “Despite weaker economic conditions in the regional energy and agriculture sectors, 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, decreased to 52.0 from August’s 57.9. “Supply managers expanded inventories for the month, but at slower pace than in August. 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 declined 53.2 from 59.8 in August. The import index for September rose to 52.8 from August’s 51.8. “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. I expect our export reading to continue to soften in the fourth quarter,” said Goss.
Delivery speed. The delivery lead time index slipped to a still high 59.0 from August’s three year high of 60.6. “As a result of rapidly expanding shipments of oil in the region, supply managers are having increasing difficulty in obtaining timely delivery of raw materials and supplies. Approximately 41 percent of businesses reported increasing difficulties in getting timely delivery of raw material and supplies,” said Goss.
This month businesses were asked how much they expect health insurance premiums to grow for 2015. On average, 2015 health insurance premiums are forecast to expand by 7.2 percent over 2014 levels. However, 16.2 percent of the businesses expect them to grow by more than 15 percent.
Other components: Other components of the September Business Conditions Index were new orders at 52.9, down from 58.1 in August; production or sales sank to 54.3 from at 60.7 in August.
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, November 3rd.
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