For only the fourth time in 2024, the Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, climbed above the 50.0 growth neutral threshold.
TheBusiness 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, declined to 50.7 from 51.3 in June and represents the seventh time in 2024 that the index bounced around growth neutral.
“The overall index, much like the U.S. reading, has vacillated around growth neutral since December of 2023. Additionally, supply managers remained pessimistic regarding the 2024 outlook with only 11% expecting growth for the rest of 2024,” 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 for December, the employment gauge has tumbled below 50.0 for the past seven months. The July employment index climbed to 49.7 from June’s 44.0.
Manufacturing job underperformers over the past 12 months include: Arkansas, Iowa, Minnesota and South Dakota. Manufacturing job achievers over the past 12 months were: Missouri, Nebraska, North Dakota and Oklahoma.
Other comments from supply managers in July:
- “Need to wait for the outcome of elections to determine economy predictions.”
- “Inflation due to government spending and subsequent printing of money continues to be the most blatant taxation on the US citizen. STOP SPENDING MONEY and not balance a budget – cut out the WASTE.”
- “The economy is finally feeling the impact of higher interest rates. Once the Fed starts cutting rates, expect short-term price increases which will have a negative effect on inflation.”
- “The deficit ceiling will need to be addressed, along with the money supply, market evaluations, bank debt and more, with solid legislation driving current and future actions. While I don’t advocate digital currency, I don’t see a way around it long term.”
- “I can only hope for some return to normalcy is around the corner as we need a new administration that believes and practices rule of law.”
Wholesale Prices: The July price gauge dropped to 59.9 from 61.4 in June, indicating cooling inflationary pressures. “This is the fifth straight month that the inflation gauge has fallen. The regional inflation yardstick has clearly declined into a range indicating inflationary pressures moving toward the Federal Reserve’s (Fed) target for the second half of 2024. As a result, I expect the Fed to cut interest rates two times in the remaining months of 2024,” said Goss.
On average, supply managers reported a 4.0% increase in the cost of raw materials and other inputs over the past 12 months. These same supply managers expect only a 2.3% increase in these costs for the next 12 months.
Confidence: Looking ahead six months, economic optimism, as captured by the July Business Confidence Index, slumped to 30.6 from June’s 34.2 and May’s 33.2. “Approximately 44% 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, sank to 50.8 from June’s 57.3. Said Goss, “As a result of falling sales expectations, supply managers reduced their supplies of raw materials and other inputs.”
Trade: Although the strong dollar continues to make U.S. goods less competitively priced abroad, the export index rose to 51.5 from 45.3. A weakening regional economy pushed the import reading down to 47.6 from 52.2 in June.
“According to the latest U.S. International Trade Administration data, the region’s manufacturing sector expanded 2024 year-to-date exports to $43.9 billion from $39.7 billion for the same period in 2023 for a 10.3% gain,” said Goss.
Other survey components of the July Business Conditions Index were: new orders increased to 51.1 from 49.0 in June; the production or sales index fell to 49.3 from 54.3 in June; and the speed of deliveries of raw materials and supplies inched higher to 52.7 from June’s 52.1. This higher reading indicates a slight expansion 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.
