The Midwestern economy slowed in March but continues to grow, according to Creighton University’s March Mid-America Business Conditions Index.
The index fell six points to 50 in March. Despite the drop, the overall index was above growth-neutral for the second straight month, after falling for each of the last three. The report was released as The Consumer Price Index increased 6 percent in February as the Federal Reserve continues to raise interest rates to cool the economy. Inflation has remained high even after the Federal Reserve Open Market Committee hiked interest rates from near-zero to just under 5 percent over the 12 months. The index for economic confidence fell four points to 34 as approximately 43.5 percent of supply managers expect economic growth to fall in the next six months.
The regional wholesale inflation gauge fell three points to 77, which still indicates strong inflationary pressures. Goss said he expects the Federal Reserve Open Market Committee to respond by announcing a 25 basis point rate hike at its next meeting in early May. The survey includes supply managers from Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.
“After flashing recession warning signals for three consecutive months, Creighton’s monthly survey of manufacturing supply managers indicates slow growth with continuing upward inflation at the wholesale level,” 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. “While it’s too early to tell if this is an end to the downward trend, it was somewhat promising on the growth front. However, the inflation reading serves as a negative signal for financial markets, and the Federal Reserve’s interest rate outlook.”
The index for employment fell two points to 50 in March. On average, supply managers expected a 3.4 percent wage gain for this year. Four of ten supply managers said supply chain disruptions and delays are their top economic challenge for this year, while three of ten identified labor shortages as top threats.
The regional inventory index remained at 58 as manufacturing firms began returning inventory to average levels. The speed of raw materials deliveries fell 18 points to 37, indicating fewer supply chain disruptions and delivery bottlenecks. Trade numbers were weak in March as export orders increased 10 points to 45 and the index for imports fell three points to 39.