After climbing above growth neutral for December and January, the Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, slumped below the 50.0 growth neutral threshold for February.
Overall Index: The Business Conditions Index, which uses the identical methodology as the national Institute for Supply Management (ISM) and ranges between 0 and 100 with 50.0 representing growth neutral, dropped to 49.1 from 50.9 in January.
“The overall index, much like the U.S. reading, has hovered around growth neutral for last three months. Additionally, supply managers remained pessimistic regarding the 2024 outlook with only 14.3% expecting a 2024 economic expansion,” said Ernie Goss, PhD, director of Creighton University’s Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics in the Heider College of Business.
The Mid-America report is produced independently of the national ISM.
Employment: After climbing to growth neutral 50.0 for December, the employment gauge tumbled to its lowest level since June 2020 in January but rose to a weak 42.9 in February. “Over the past 12 months, according to U.S. Bureau of Labor Statistics data, the region’s job openings declined by 156,000, or 16.3%, while the number of layoffs fell by 2,000, or 1.1%,” said Goss.
This month, supply managers reported that the share of their firm’s employment working from home was approximately 14.0%. One supply manager reported that, “0% are working from home.”
“Even so, 43.5% of firms reported a shortage of job applicants, while 13.0% reported that their firm was not hiring due to an economic slowdown,” said Goss.
Other comments from supply managers in February:
- “Difficult to ignore the problem with labor, also difficult to ignore all of the other problems including the tax of inflation.”
- “Sales orders are down.”
- “The government tells us that inflation is way down, but we are not seeing it.”
- “We can’t allow our government to continue kicking the can down the road. We must get control of our spending and demand a balanced budget!”
- “While I dislike Trump’s personality, I can’t argue with his knowledge of business, the economy and desire to have other countries pay their fair share as the U.S. has been abused financially far too long.”
Wholesale Prices: The wholesale inflation gauge for the month fell to 61.9, indicating only modest inflationary pressure, from January’s 71.7. “Approximately 60% of supply managers in February’s survey identified escalating input prices as the top economic threat over the next six months; 15% identified a shortage of workers; 14% reported rising regulations; and the remaining 11% identified a variety of issues,” said Goss.
“Even though the inflation rate and job growth have been trending lower, I do not expect a Federal Reserve rate cut until June or July of this year,” said Goss.
Confidence: Looking ahead six months, economic optimism, as captured by the February Business Confidence Index, rose to a very weak 33.4 from 31.9 in January. “Approximately 48% of supply managers expect worsening business conditions over the next six months,” said Goss.
Inventories: The regional inventory index, reflecting levels of raw materials and supplies, declined to 54.4 from January’s 58.7. Said Goss, “The question remains, was this contraction intentional, planned or unplanned due to a sales downturn?”
Trade: Trade numbers were very weak for the month with new export orders sinking to 23.9 from January’s 35.8. February’s import reading declined to a weak 38.1 from 47.3 in January.
Other survey components of the February Business Conditions Index were: new orders slumped to 40.5 from 47.9 in January; the production or sales index sank to 42.9 from 45.7 in January; and the speed of deliveries of raw materials and supplies decreased to 54.8 from January’s strong 63.1. The reduction indicates a fall in supply chain disruptions and delivery bottlenecks for the month.
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, and state reports can be found here.
