In his monthly Mid-America Business Conditions Index survey of supply managers, Creighton University Economics Professor Ernie Goss, PhD, says the economy is experiencing stagflation, a time of very low growth and high inflationary pressures.
The September index remained above growth neutral but declined for the fifth time in the last six months, but registered its lowest reading in more than two years at 52.7, down from 55.5 in August.
Goss says supply managers surveyed are still dealing with a slew of challenges that are impeding economic growth, with 43 percent saying supply chain disruptions, 35.6 percent pointing to labor shortages, 10.7 percent naming higher input costs, 7.1 percent saying global recession with the lowest reading of higher interest rates at 3.6 percent.
Inflationary pressures are subsiding according to Goss, but he expects the inflation rate to remain above 6% for the rest of 2022, with short-term rates to rise another half-point by next January. And while manufacturing is stronger than the rest of the economy, he says the housing market is struggling as long-term interest rates won’t be coming down.
“If you need to borrow, borrow today. Interest rates are not going to get lower – long-term or short-term. Long-term interest rates are going to rise,” says Goss. “We’re seeing mortgage rates tip above 7% for the first time in 15 years. We’re seeing some of the worst mortgage rates and they’ll continue to rise. I think the increase will soften in the first quarter of 2023.”
Ahead of the holiday season, supply chain disruptions are expected to ease due to pre-buying, but holiday hiring activity is expected to be weak this year.
While Nebraska was tops in the region for manufacturing wage growth the past 12 months, the state’s BCI for September sank below growth neutral to 47.9, down nearly six points from the previous month.