Supply manager sentiments improved last month but remain stunted as 45 percent expect a recession to strike this year, according to Creighton University’s August Mid-America Manufacturing Index.
Creighton’s Business Conditions Index increased 3.5 points in August to 49.5, its second straight month of falling below the growth-neutral mark of 50. Only 27 percent expected their firms to grow during the rest of this year. Regional manufacturing employment dropped for the third straight month as economic confidence for the next six months dropped to 26.3 from 32.6 in July.
“The Mid-America regional manufacturing economy is definitely losing momentum,” 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.
Goss doesn’t expect the Federal Reserve to change short-term interest rates at its next meetings from Sept. 19-20 before raising rates in the fourth quarter of this year. The Federal Open Market Committee raised its benchmark federal funds rate 25 basis points in July to a range of 5.25 to 5.5 percent. Since August 2022, the FOMC has raised the policy rate by 300 basis points and considerably reduced the size of its securities holdings. Chair Jerome Powell said last month that the Fed is prepared for additional interest rate hikes and will maintain a restrictive economic policy until inflation falls to its long-term target of 2 percent.
“The rapid expansion in federal government spending will push the Federal Reserve to keep its foot on the economic brakes via raising short-term rates,” Goss said.
The survey tracks the sentiments of supply managers in nine states, including Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.
Other report findings included:
- The wholesale inflation gauge increased to 63.7 in August from 52.2 in July. Supply managers expect prices for the products and services their firms purchase to increase 5 percent over the next 12 months.
- Regional manufacturing exports increased by 5.2 percent in the first half of this year from the same period of 2022. The gauge for imports increased to 41.2 from 35.3 in July.
- The regional inventory index, which reflects levels of raw materials and supplies, increased to 54.6 from 52.3. “Manufacturing firms have been expanding inventory levels since February of this year,” Goss said.