Business Index Falls to Lowest Level since June 2020:

OMAHA, Neb. (October 3, 2022) — The Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, fell again in September but remained above growth neutral for the 28th straight month.

Overall Index: The Business Conditions Index, which uses the identical methodology as the national Institute for Supply Management (ISM) and ranges between 0 and 100 with 50.0 representing growth neutral, dropped to 52.7 in September from August’s 55.5. This marks the index’s lowest reading since June 2020, and the fifth decline in the past six months.

The Mid-America report is produced independently from the national ISM.

As stated by one supply manager, “Just seems like things are slowing down. Not drastically, but still slowing down.”

“Creighton’s monthly survey results indicate the region continues to add manufacturing activity, but at a slower pace with declining inflationary pressures. Supply chain disruptions eased further in September, according to supply managers,” said Ernie Goss, PhD, director of Creighton University’s Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics in the Heider College of Business.

Employment: Despite healthy growth in monthly economic activity for almost two years, manufacturers in the region have added jobs at only a modest pace. The employment index remained above growth neutral in September, increasing only slightly to a tepid 51.9 from August’s 51.8.

Other September comments from supply managers were:

• “(Our) company’s products are not tied to the holiday business rush. The 15% increase noted above is based on order backlog and schedule work activities from last year.”
• “I assume there will be a pullback over the next quarter and beyond. The labor and inflation pressures are compounding and not linear.”
• “Consumer spending has moved away from mattresses and furniture.”
• “I assume all utilities demand material and services from the same specialty suppliers nationwide.”
• “Our company is shut down from Dec. 23 to Jan. 2.”
• “Higher (interest) rates are going to slow things down. Not sure that is going to help the unemployment situation any!”

Wholesale Prices: The wholesale inflation gauge for the month softened to its lowest reading since August 2020. The inflation reading fell to 71.2 for September from 76.0 in August. “As oil prices have stabilized at a lower level, so has inflation. Even so, I expect the Federal Reserve to announce an interest rate hike of 50 basis points (0.50%) to combat inflation at its Nov. 1-2 meetings,” said Goss.

Supply chain managers were asked to identify the greatest challenge for Quarter 4 of 2022. Approximately 43.0% named supply chain disruptions as the greatest challenge. This is down from 58.6% recorded last month.

One supply manager reported that as a result of these disruptions, “Supply chain issues continue to adversely affect us.”

In addition to the challenge of supply chain disruptions, managers identified other top risks: 35.6% named labor shortages (up from 24.1% recorded in August), 10.7% reported higher inflation (10.4% in August), 3.6% identified elevated interest rates (6.9% in August) and 7.1% reported a global recession (less than 1% in August).

According to the U.S. Bureau of Labor Statistics, commodity prices are up approximately 15.3% over the last 12 months with farm products advancing by 22.3%, metal products expanding by 3.4% and fuels soaring by 37.3% during this same time period.

Confidence: Looking ahead six months, economic optimism as captured by the September Business Confidence Index slumped to a very weak 25.9 from 32.2 in August. “Confidence indices for each month in 2022, all below growth neutral, are the worst string of readings since the 2008-09 recession,” said Goss.

Inventories: The regional inventory index, reflecting levels of raw materials and supplies, increased to 65.5 from August’s 57.4. “Manufacturing firms are stockpiling inventories to avoid threats of supply chain disruptions,” said Goss.

Trade: Supply chain bottlenecks and a very strong dollar punished exports as the September reading again fell below growth neutral but increased to 44.5 from 43.8 in August. On the other hand, the stronger dollar and regional manufacturing expansion pushed the imports index above growth neutral to 50.1, but it was down from August’s 52.6.

Other survey components of the September Business Conditions Index: new orders slumped to 46.2 from 48.0 in August; the production or sales index sank to 46.2 from 56.0 in August; and the speed of deliveries of raw materials and supplies declined to 53.9 from August’s 64.4. This lower reading indicates a reduction in supply chain disruptions and fewer delays for the month. September’s reading was the lowest recorded since June 2020.

The Creighton Economic Forecasting Group has conducted the monthly survey of supply managers in nine states since 1994 to produce leading economic indicators of the Mid-America economy. States included in the survey are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.

Arkansas: After falling below growth neutral for three straight months, the Business Conditions Index for Arkansas climbed above this threshold to 58.4 from 49.6 in August. Components from the September survey of supply managers were: new orders at 48.1, production or sales at 44.0, delivery lead time at 57.0, inventories at 77.8 and employment at 65.2. “As a result of weakness in the state’s manufacturing sector, U.S. Bureau of Labor Statistics (BLS) data show that hourly wages of manufacturing workers in the state declined from $24.06 to $23.73, or by 1.4%, over the past 12 months,” said Goss.

Iowa: The state’s Business Conditions Index for September dropped to 50.9 from August’s 55.7. Components of the overall September index were: new orders at 45.8, production or sales at 43.3, delivery lead time at 53.3, employment at 49.4 and inventories at 62.4. “Durable goods manufacturers, including machinery manufacturing, are reporting solid growth. Non-durable goods producers, including food processors, reported healthy expansions. BLS data indicate that average hourly manufacturing wages expanded from $26.03 to $28.07, or by 7.9%, over the past 12 months,” said Goss.

Kansas: The Kansas Business Conditions Index for September declined to a weak 48.0 from August’s 54.8. Components of the leading economic indicator from the monthly survey of supply managers for September were: new orders at 45.5, production or sales at 44.8, delivery lead time at 51.7, employment at 42.4 and inventories at 55.6. “Durable goods producers, including machinery manufacturers, are reporting solid growth. Non-durable goods producers, including food processors, are reporting modest growth. BLS data indicate that average hourly manufacturing wages expanded from $25.22 to $27.29, or by a strong 8.2%, over the past 12 months,” said Goss.

Minnesota: The September Business Conditions Index for Minnesota dropped to a solid 53.2 from 64.3 in August. Components of the overall September index were: new orders at 46.0, production or sales at 46.3, delivery lead time at 54.3, inventories at 66.2 and employment at 53.3. “Durable goods manufacturers, including medical equipment manufacturers, are reporting solid growth. Non-durable goods producers, including food processors, are reporting healthy growth with BLS wage data indicating that average hourly wages expanded from $30.35 to $32.48, or by 7.0%, over the past 12 months,” said Goss.

Missouri: After three straight months of readings below growth neutral, the Missouri Business Conditions Index climbed to 50.4 in September from August’s 48.3. Components of the overall index from the survey of supply managers for September were: new orders at 45.7, production or sales at 45.5, delivery lead time at 52.9, inventories at 60.5 and employment at 47.4. “Durable goods manufacturers, including metal producers, are reporting improving growth. Non-durable goods producers, including food processors, are reporting modest growth in economic activity. BLS data indicate that average hourly manufacturing wages expanded from $28.24 to $30.53, or by 8.1%, over the past 12 months,” said Goss.

Nebraska: Nebraska’s overall index for September sank to 47.9 from 53.6 in August. Components of the index from the monthly survey of supply managers for September were: new orders at 45.5, production or sales at 44.7, delivery lead time at 51.7, inventories at 55.4 and employment at 42.1. “Durable goods manufacturers, including metal producers, are reporting solid growth. Non-durable goods producers, including food processors, are reporting slow growth. BLS data indicate that average hourly manufacturing wages increased from $25.25 to $28.11, or by a very strong 11.3%, over the past 12 months,” said Goss.

North Dakota: After three straight months of below growth neutral readings, the September Business Conditions Index for North Dakota climbed to a solid 55.0 from 48.8 in August. Components of the overall index for September were: new orders at 46.1, production or sales at 46.9, delivery lead time at 55.1, employment at 56.9 and inventories at 69.8. “Durable goods manufacturers are reporting positive growth. On the other hand, non-durable goods manufacturers, including food processors, are reporting pullbacks in economic activity. BLS data indicate that average hourly manufacturing wages expanded from $26.97 to $28.09, or by a modest 4.2%, over the past 12 months,” said Goss.

Oklahoma: Oklahoma’s Business Conditions Index declined in September to a level indicating still solid growth. The September index decreased to 55.6 from 60.7 in August. Components of the overall September index were: new orders at 46.2, production or sales at 47.1, delivery lead time at 55.4, inventories at 71.0 and employment at 58.2. “Durable goods manufacturers, including metal producers, are reporting modest growth. Non-durable goods producers, including food processors, are reporting solid growth. BLS data indicate that average hourly manufacturing wages expanded from $27.96 to $29.44, or by 5.3%, over the past 12 months,” said Goss.

South Dakota: The September Business Conditions Index for South Dakota decreased to 53.3 from 60.5 in August. Components of the overall index from the September survey of supply managers in the state were: new orders at 46.0, production or sales at 46.4, delivery lead time at 54.3, inventories at 66.3 and employment at 63.4. “Durable goods and non-durable goods are reporting slower growth in economic activity and jobs. On the other hand, BLS data indicate that manufacturing wages grew from $23.77 to $26.07, or by a strong 9.7%, over the past 12 months,” said Goss.