Supply manager sentiments improved last month but are still weaker than a year ago amid job losses and recession fears, according to Creighton University’s September Mid-America Manufacturing Index.
Creighton’s Business Conditions Index increased three points to 52.5, indicating expansion for the first time in three months. Negative sentiments continued, however: Regional manufacturing has weakened over the past year, noted Ernie Goss, director of Creighton’s Economic Forecasting Group and the Jack A. MacAllister chair in regional economics in the Heider College of Business.
The index for business confidence increased to a still-weak 29.6 in September from 26.3 in August as nearly a third of supply managers expect a recession to begin early next year. The regional hiring gauge increased to 51.5 from 47.7 in August even as the regional manufacturers shed jobs for the fourth time in five months on a seasonally-adjusted basis. Goss expects those job losses to continue in the coming months.
“For the first nine months of 2023, Creighton’s monthly survey indicated steady employment growth with levels maintained due to manufacturers’ labor hoarding,” Goss said. “However, employment readings over the past several months signal an upturn in layoffs in the region.”
The regional inflation gauge increased to 68.2 from 63.7 in August as 41 percent of supply managers reported an increase in wholesale prices. Goss predicts the Federal Reserve will raise short-term interest rates 25 basis points once more this year, after the Fed paused its federal funds rate last month at between 5.25 percent and 5.50 percent. Goss also expects Chair Jerome Powell to reiterate the Fed’s plan to reduce its balance sheet, causing long-term interest rates to rise.
The index for regional inventories continued to indicate expansion at 54.9. “Manufacturing firms have been expanding inventory levels since February,” Goss noted.
Trade numbers fell to 34.5 from 39.3 in August. The imports index increased to 44.1 from 41.2 in August. Manufacturing exports increased 4.3 percent to $54 billion during the first seven months of this year on an annual basis, according to the U.S International Trade Association. The speed of deliveries of raw materials and supplies increased to 57.6 from 52.3 in August, indicating a rise in supply chain disruptions and delivery bottlenecks.
The Business Conditions Index covers nine states, including Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Oklahoma.