Each month, Creighton University predicts the health of the Midwest economy through a survey of supply managers across a nine-state section of Mid-America. Its March results indicated continued growth, an increase in jobs, and a likely Fed rate hike in May.
The Business Conditions Index increased to 62.1 from February’s 59.9, continuing a 16-month streak where the index reads above growth neutral. This overall index is the average of all indices surveyed, and an index above 50, or growth neutral, suggests an expanding economy. March’s rating is the highest the overall index has been since June 2017, and points to continued growth for the next three to six months in the region.
Twenty percent of the survey participants reported rapidly expanding healthy economic growth in their area while only 4 percent reported an economic downturn, said Ernie Goss, the director of the survey and Creighton’s regional economics chairman. The results revealed that two-thirds of Midwest firms expect to add workers for the rest of 2018. “Durable goods are expanding at almost twice the pace of nondurable goods producers,” Goss said.
The wholesale inflation index remains high at 80.7, dropping slightly from last month’s 82. Goss said that we’ll likely begin to see the impact on a consumer level in May. “I expect the Federal Reserve’s interest rate setting committee to raise short-term interest rates by one quarter of one percentage point (or 25 basis points),” Goss said.
The report showed a rising export index to 63.5 from 59.5, and a one-point decrease in imports to 63.6. “A cheap U.S. dollar making U.S. goods more competitively priced abroad, and growth among U.S. trading partners, supported regional exports, while regional economic growth boosted purchases from abroad,” Goss said.
The March index also suggested that at a quicker pace than in February, businesses expanded supplies of raw materials and goods, climbing to 59.4 from 56.7.
Overall, the confidence level dropped ten points to 64.3 in March from 74.5 in February, but Goss said economic optimism remains high. “Healthy profit growth, still low interest rates, and a reduction of global trade tensions pushed business confidence into a range indicating healthy business confidence.”