Supply manager sentiments increased in October despite ongoing supply chain and inflation concerns, according to Creighton University’s Mid-America Business Conditions Index.
The index increased three points to 51.1, which was above the growth-neutral score of 50 for the fifth time this year. Forty percent listed supply chain disruptions as the greatest economic threat amid the ongoing conflicts in the Middle East and the recent longshoremen strike involving 47,000 port workers on the East Coast and Gulf Coast, noted Ernie Goss, director of Creighton University’s Economic Forecasting Group.
Twenty-eight percent cited inflation as the greatest threat, followed by 11 percent who listed labor shortages. The price gauge remained relatively high at 56.5 as inflation remains higher than the Federal Reserve’s long-term 2 percent target. Goss expects the Federal Open Market Committee will reduce interest rates 25 basis points on Nov. 7. “They got way ahead of themselves the last time,” Goss said of the FOMC’s 50-basis-point cut in September. Goss expects inflation will increase entering next year, causing long-term interest rates to rise and mortgage rates to approach 7 percent.
Regional hiring remained weak as labor shortages constrained growth, Goss said. The nation’s manufacturing sector has lost 43,000 jobs since the start of the year, with regional manufacturing down 3,700 jobs. The related manufacturing index was stagnant at 44.
Goss said falling oil prices are being caused by an excess of supply and a drop in demand. “Whether it’s Germany, whether it’s Europe, whether it’s China, whether it’s Japan, the US, these economies are not moving up at a brisk pace,” he said.
Goss expects gold prices will continue to increase and remain a good investment. He said Brazil, Russia, India and China are buying the product to launch a digital currency backed by gold to undermine the U.S. dollar as a reserve currency.
