Sixty percent of Midwest supply chain managers expect a recession will strike this year as January’s business conditions sentiment reached its lowest mark for the start of the year since 2008, according to Creighton University’s Mid-American Economy report.
The index for business conditions, which remained at 47, is at its lowest January reading since the start of the Great Recession, according to the report. The index has dropped in eight of the last nine months. The index for economic optimism increased only two points — to a still-weak 25 — as managers cited supply chain delays and disruptions as their top threats for this year.
“Creighton’s monthly survey of manufacturing supply managers is flashing recession warnings for 2023,” 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.
The index for new hiring rose eight points to 46, its third increase in the last four months.
However, regional manufacturers continued to add jobs only at a modest pace, according to the report, despite strong growth in monthly economic activity. Regional, seasonally-adjusted nonfarm employment remains under its pre-pandemic average in most of the report’s nine-state region. Average inflation-adjusted wages fell by 2.2 percent last year. Labor shortages, long seen as a main impediment to economic growth, were not listed as one of the top threats this year due to higher input costs and an economic downturn, Goss noted.
The index for regional inventories fell 14 points to 38, which Goss said reflects manufacturing firms returning their inventory to normal levels following months of stockpiling. The index for new orders increased seven points to 44; while the sales index jumped 11 points to 50. The speed of deliveries of raw materials and supplies grew three points to 55, indicating more supply chain disruptions and bottlenecks in January.
Supply manager apprehension comes as prominent economists expect a recession. The American Bankers Association’s Economic Advisory Committee predicted last month that the economy will see no economic growth this year before expanding by 1.6 percent in 2024.