The Midwest economy is softening amid warning signs of a pending recession, according to Creighton University’s November Mid-America Business Conditions Index.
The index, which tracks the sentiments of supply managers in a nine-state region, fell five points last month to 48, the first time the reading has fallen below the growth-neutral score of 50 since May 2020.
Supply managers continue to lack confidence in the economy. Economic optimism for the next sixth month increased seven points to 25, much lower than the survey’s historical average. Ernie Goss, director of Creighton’s Economic Forecasting Group, said the reading indicates recessionary warnings for the first half of 2023.
“Since climbing to a 2022 high in March, the overall index has now fallen six of the past eight months,” noted Goss, Jack A. MacAllister chair in regional economics in the Heider College of Business. “One in four supply managers rate higher input prices as the greatest 2023 challenge.”
The region’s index for employment dropped one point to 45 in November. The tight labor market continued to plague supply managers. Sixty-five percent reported job applicant shortages for available positions as employers only added jobs “at a modest pace,” Goss said.
High prices also continue to pose headaches for supply managers. The related index increased seven points last month to 72. “As a result of continued inflationary pressures, I expect the Federal Reserve to announce an interest rate hike of 50 basis points to combat inflation at its next meetings on Dec. 13-14,” Goss said.
Creighton’s index for inventories of raw materials and supplies fell 20 points to 45 in November, a drop Goss attributed to inventory levels normalizing following months of supply managers stockpiling products.
The index covers nine states: Arkansas, North Dakota, South Dakota, Iowa, Kansas, Minnesota, Missouri, Nebraska, Oklahoma and South Dakota.