The Midwest economy remains in growth mode as inflationary concerns drop and manufacturers stockpile inventory to avoid supply chain shortages, according to Creighton University’s October Mid-American Economy report.
The Business Conditions Index, which ranges between 0 and 100, dropped three points to 52 last month from 55 in August, the lowest reading since June 2020. The overall index fell for the fifth time in the last six months but remained above growth-neutral for the 28th straight month.
“Creighton’s monthly survey results indicate the region continues to add manufacturing activity, but at a slower pace with declining inflationary pressures,” said Ernie Goss, director of Creighton University’s Economic Forecasting Group and the Jack A. MacAllister chair in regional economics in the Heider College of Business.
Manufacturers reported stockpiling inventory, as 43 percent listed supply chain disruptions as their No. 1 challenge for the fourth quarter of this year. Reductions in supply chain disruptions and delays were reported: The regional inventory index, which reflects levels of raw materials and supplies, increased eight points to 65. The speed of deliveries of raw materials and supplies fell 11 points to 53. The production or sales index fell 10 points to 46, and new orders fell two points to 46.
More than one-in-three managers listed labor shortages as their top challenge while 10 percent listed high inflation readings. Lesser percentages listed a global recession and higher interest rates as the top risks.
The wholesale inflation gauge fell in September, falling five points to 61. Despite easing inflation, commodity prices have still increased 15 percent over the past 12 months, according to the U.S. Bureau of Labor Statistics, while farm products have risen by 22 percent and fuels 37 percent during the same period.
“As oil prices have stabilized at a lower level, so has inflation,” Goss said. “Even so, I expect the Federal Reserve to announce an interest rate hike of 50 basis points to combat inflation at its Nov. 1-2 meetings.”
The survey includes nine states: Arkansas, Iowa, Kansas, Missouri, Minnesota, Nebraska, North Dakota, Oklahoma and South Dakota.