Optimism grows as recessionary fears continue

Supply manager and consumer sentiments increased last month as fears of a looming recession lessened and inflation showed signs of easing, according to Creighton University’s monthly survey of supply managers in a 9-state region. 

December’s Mid-America Business Conditions Index increased to 50.3 last month from 42.2 in November. Despite the rise in optimism, 46 percent of supply managers still expect a recession in the first half of this year, said Ernie Goss, Jack A. MacAllister chair in regional economics at Creighton’s Heider College of Business. 

Economic optimism remained muted in December at 35.2, a slight drop from 35.8 in November. The regional inventory index increased to 46 in December from 42.6 in November as manufacturing firms slowed the pace of inventory expansion in the last two months of 2023.

Goss said the continued increase in federal government spending and debt will limit the ability of the Federal Reserve Open Market Committee to reduce interest rates this year. Still, he expects the FOMC will keep interest rates at between 5.25 and 5.50 percent later this month before cutting rates in March. 

The index tracking hiring increased to 50 from 42.5 in November even as the regional manufacturing sector shed 4,400 jobs over the past 12 months. Average hourly wages grew 3.4 percent, more than the 3.1 percent rise in consumer prices. The wholesale inflation gauge fell to 57.7 from 71.1 in November as supply managers expect their input prices to increase nearly 6 percent this year.

Consumer confidence captured by The Conference Board Consumer Confidence Index increased to 110.7 in December from 101.0 in November. The index based on consumers’ assessment of current labor market and business conditions increased to 148.5 from 136.5 in November, while the index based on consumers’ short-term outlook for labor market, income and business conditions increased to 85.6 from 77.4. Two-thirds of consumers saw an economic downturn as possible in 2024, which was the lowest percentage of the year.  

“December’s increase in consumer confidence reflected more positive ratings of current business conditions and job availability, as well as less pessimistic views of business, labor market and personal income prospects over the next six months,” added The Conference Board Chief Economist Dana Peterson.