Supply manager sentiments continue to reflect growth even as a majority expect business conditions to weaken in the first half of 2024, according to Creighton University’s October Mid-America Manufacturing Index.
The index fell one point to 51.5 from 52.5 in September as 60 percent of supply managers expect an economic downturn during the first half of next year. The index tracking economic confidence for the next six months fell to 25 from 29.6 in September as approximately 60 percent of supply managers expected a slump in business conditions.
Approximately 40 percent of supply managers cited excessive inflation as the greatest economic risk for their firm in the next six months, while three of 10 indicated labor shortages as their most pressing risk.
“The Mid-America regional manufacturing economy has weakened from earlier in the year and from the same period in 2022,” noted Ernie Goss, chair in regional economics at Creighton’s Heider College of Business.
The regional hiring gauge fell four points to 47.5 as the region’s average manufacturing wage rate increased 3.4 percent over the past 12 months, just under the 3.7 percent rise in consumer prices. Regional manufacturing economy employment increased 0.7 percent over the past 12 months, the smallest annualized gain this year.
“Despite job losses for October, Creighton’s monthly survey indicated levels maintained due to manufacturers’ labor hoarding,” Goss said. “Employment readings over the past several months signal an upturn in layoffs in the region.”
October’s wholesale inflation gauge fell to 55 from 68.2 in September as manufacturing supply managers expect prices to increase by 4.2 percent over the next six months. “This would represent a significant upturn in inflationary pressures in the months ahead,” Goss said.
The region’s inventory index fell to 50.1 from 54.9 in September as manufacturers expanded inventory levels at a slower pace than earlier in 2023. Trade numbers were weak in October, with the index for new orders growing to 41.7 from 34.5 in September and imports index increasing to 50.2 from 44.1 the previous month. The index tracking the speed of deliveries of raw materials and supplies increased to 60 from 57.6 in September, which Goss attributed to an uptick in supply chain disruptions and delivery bottlenecks.
Goss expects the Federal Open Market Committee to raise the Federal Funds Rate 25 basis points in mid-December following recent growth in federal government spending and debt. The FOMC held rates at 5.25 and 5.5 percent on Nov. 1.