The July Mid-American Economy report recently released by Creighton University/Heider College of Business predicts “very strong growth” over the next three-six months but also indicates inflation and a falling confidence index.
The report, released Aug. 2, found that economic optimism had fallen to its lowest level in five months and wholesale inflation surged to another record high of 98.7, up from the previous record high, June’s 98.4. According to the report, more than half of supply managers expect soaring input prices to be pushed off to their customers, and nearly 38 percent of supply managers expect rising input prices to be absorbed by their companies in the form of lower profits.
As part of the Purchasing Management Index, indices are reported for the overall economy, new orders, production, inventories, employment, delivery lead time, prices and confidence. The overall PMI is a composite index based on new orders, production, inventories, employment and delivery lead time. The Business Conditions Index ranges from between 0 to 100. An index above 50 percent indicates expansion while an index below that number signals contraction over the next three to six months. That number slightly dipped to 73.1 from 73.5 across the nine states the survey covers: Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota. The Index rose in Arkansas, Minnesota and Missouri and decreased in the other six. As in previous months, between 80 and 90 percent of manufacturing supply managers reported that labor shortages and supply bottlenecks continued to restrain growth.
“Creighton’s monthly survey results indicate the region is adding manufacturing business activity at a very healthy pace, and that regional growth will remain strong. Absent supply bottlenecks and labor shortages, that growth would be even stronger,” said Ernie Goss, director of Creighton University’s Economic Forecasting Group and the Jack A. MacAllister chair in regional economics for the Heider College of Business.
Other July report findings include:
- Economic optimism for the next six months, economic optimism, as captured by the July Business Index, slumped to 53.6 from June’s 60.8 and May’s very strong 88.6.
- The regional employment index remained above growth neutral for July by rising to 67.2, its highest level in more than two decades, from 61.7 in June. Even with healthy job growth, however, firms reportedly continued reporting difficulties in finding and hiring new workers.
“Even with strong manufacturing job growth, the region has yet to recover all job losses from the pandemic. The latest U.S. Bureau of Labor Statistics data indicate that current regional nonfarm employment is down by 540,000 jobs, or 3.9 percent, compared to pre-Covid-19 levels,” Goss said.
- The wholesale inflation gauge for July increased to a record 98.7 from June’s 98.4, the previous record high.
“At the wholesale level, Creighton’s survey is tracking higher and higher inflationary pressures. Commodity prices are up approximately 19.5 percent over the last 12 months, according to U.S. Bureau of Labor Statistics data. Supply managers in Creighton’s June survey expect prices for their firm’s products to advance by 7.7 percent for the next 12 months,” Goss said.
- The regional inventory index, reflecting levels of raw materials and supplies, climbed to 70.7 from last month’s 67.9. Despite supply chain bottlenecks, regional trade members were reportedly solid for the month. The new export orders index sank to a still healthy 63.9 from June’s 72.2. An expanding domestic manufacturing sector boosted July’s import reading to 65.3, which was up from June’s 52.4.
More information on the survey can be found at: https://bit.ly/2ViCfKt.