Global Sales Push Mid-America Index Into Positive Territory:
Expected Yearly Price Growth of 1.5 Percent
July survey results at a glance:
- Leading economic indicator falls to a still healthy reading for the month.
- Almost one-fourth of businesses report expanding global sales are the biggest driver of company sales over the past year.
- New export orders continue to expand at a healthy pace.
- Companies expect to increase the prices of their products and services by 1.5 percent over the next 12 months.
For Immediate Release: August 1, 2014
OMAHA, Neb. – The Mid-America Business Conditions Index for July, a leading economic indicator for a nine-state region, stretching from North Dakota to Arkansas, slumped from June’s very healthy reading. Even so, indices over the past several months are pointing to solid economic gains over the next three to six months for the region.
Overall index: The Business Conditions Index, which ranges between 0 and 100, sank to 57.0 from June’s very healthy 60.6. “After rising to its highest level in more than three years in June, the overall reading fell, but remained above growth neutral 50.0 for the month.
“Supply managers indicated anecdotally that a weaker housing market is restraining growth while the region’s energy sector, including alternative energy, is a source of positive growth,” 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.
Almost one-fourth, or 23.5 percent of supply managers, reported expanding global sales have been the biggest driver of company sales over the past year. Another 16 percent of supply managers indicated that expansion in the farm sector was the major factor pushing their company sales higher for the year. Other factors named as predominant include: the Affordable Care Act, 7.4 percent, low interest rates, 6.3 percent, rebound in housing, 6.1 percent, other factors, 40.7 percent.
Employment: The employment index for July fell to 53.8 from June’s two-year high of 61.4. “While regional job growth remains solid, it is now about one-half of one percentage point below the U.S. Furthermore, U.S. Bureau of Labor Statistics data indicate that average weekly earnings for the region have expanded by only 1.3 percent over the past 12 months compared to 2 percent for the U.S. Regional motor vehicle manufacturing and companies linked to this industry have been adding jobs at a brisk pace,” 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 67.6 from June’s 73.5. Inflationary pressures at the wholesale level have recently cooled a bit but remain elevated from the same time last year. “This month we asked supply managers how much they expected the sales price of their companies’ products and services to change in the next year. On average, supply managers expect their company prices to rise by only 1.5 percent in the next year,” said Goss.
“Our surveys along with other regional and national surveys are pointing to the same inflation outcome; rising but still modest inflationary pressures in the next 3 to 6 months,” said Goss.
Confidence: Looking ahead six months, economic optimism, as captured by the July business confidence index, dipped to 60.0 from 63.6 in June. “Despite growing global tensions, 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, declined to 51.3 from June’s solid 54.0. “While the rate of inventory expansion slowed, it was still positive. 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 slipped to 57.5 from June’s 60.2. The import index for July jumped to 57.7 from June’s 53.4. “It is a very encouraging signal to track very healthy export readings and an eighth straight month of expanding export orders. Exports remain an important source of growth for the region. At the same time, firms in the region continued to expand purchasing from abroad in expectations of upturns in company sales in the weeks and months ahead,” said Goss.
Other components: Other components of the July Business Conditions Index were new orders at 61.5, down from 67.2 in June; production or sales at 65.0, down from June’s 66.0; and delivery lead time for July dropped to 53.7 from last month’s 54.4.
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 July will be released on the first business day of next month, September 2nd.
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