Mid-America Manufacturing Expands for the Month: Job Losses Continue with Elevated Inflation

April 2024 Survey Highlights:
-Overall, th3 Business Conditions Index, climbed to its highest level since September 2023.
-The wholesale price remained at a level indicating elevated inflationary pressures.
-The region’s manufacturing sector lost jobs for a fourth straight month.
-Supply managers expect input prices to expand by 5.3% over the next six months.
-Survey participants reported a wage gain of 3.5% over the past 12 months, or below the rate of inflation.
-The number of discharges and layoffs in the region soared by 24.5%, or 35,000 involuntary separations over the past 12 months.
 
OMAHA, Neb. (May 1, 2024) — After two straight months of below growth neutral, the Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, climbed above the 50.0 growth neutral threshold for April.

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, increased to 52.5, highest since September 2023, from March’s 49.6 and represents the third time in the past five months that the index has risen above growth neutral.

“The overall index, much like the U.S. reading, has vacillated around growth neutral for the last five months. Additionally, supply managers remained pessimistic regarding the 2024 outlook with approximately 45% expecting a recession in the second half of  2024,” 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.

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

Employment: After climbing to growth neutral for December, the employment gauge has tumbled below 50.0 for the past four months. The April employment index fell to 40.0 from March’s 40.9.  “Over the past 12 months, according to the latest monthly U.S. Bureau of Labor Statistics data, the number of discharges and layoffs in the region soared by 24.5%, or 35,000 job involuntary separations over the 12 months,” said Goss.

“Despite labor shortages and elevated inflationary pressures, supply managers reported a 12-month wage gain of only 3.5%, or less than inflation over the same period of time,” said Goss.

Other comments from supply managers in April:

“Our input costs are affected by crude oil prices.”
“Predicting that ‘Basic Commodities’ in general will see price erosion in the next year. In addition, where there is opportunity for cost reduction initiatives, overall cost of goods sold will go down.”
“Areas where there is lack of completion or inability to make changes, will show high increases in prices.”
“Orders down and prices are up.”
“Price of fuel and housing starting to impact our business dramatically. Fuel is stable, but housing is weak, so business is soft, but fairly stable.”
“We expect the current challenging business environment to slightly worsen until the Fed cuts interest rates.”
“Inflation and national debt - the silent tax that is accelerating. Wake up!”

Wholesale Prices: The April price gauge slipped to a still too high 76.0 from 77.3 in March. Supply managers expect input prices to expand by 5.3% over the next 6 months.  “The regional inflation yardstick has moved into a range indicating elevated inflationary pressures and points to price growth well above the Fed’s target for the second half of 2024,” said Goss. 

Confidence: Looking ahead six months, economic optimism as captured by the April Business Confidence Index sank to 32.0, its lowest level since January 2024, and down from 41.0 in March.  “Approximately 45% of supply managers expect worsening business conditions over the next six months.  However, this is an improvement from March’s 68% that expected economic deterioration,” said Goss.

Inventories: The regional inventory index, reflecting levels of raw materials and supplies, climbed to 56.3 from March’s 54.6. Said Goss, “Manufacturers have increased inventories in anticipation of greater sales in the months ahead.”

Trade: The rising value of the U.S. dollar, making U.S. goods less competitively priced abroad is hurting exports.  As a result, export numbers worsened for the month with new export orders sinking to 42.9 from March’s 53.9.  April’s import reading climbed to a weak 47.4 from 44.2 in March. 

Other survey components of the April Business Conditions Index were: new orders increased to a solid 58.4 from 47.8 in March; the production or sales index improved to 52.0 from 50.1 in March; and the speed of deliveries of raw materials and supplies climbed to 56.0 from March’s 54.5. The increase indicates an upturn in supply chain disruptions and delivery bottlenecks for the month.

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.

Below are the state reports:

Arkansas: The state’s Business Conditions Index increased to 53.2 from March’s 50.1. Components from the April survey of supply managers were: new orders at 59.1; production or sales at 52.0; delivery lead time at 58.2; inventories at 59.8; and employment at 37.0. According to the latest month’s U.S. Bureau of Labor Statistics data, involuntary job losses expanded by 4,000, or 30.8%, over the past 12 months in Arkansas.   

Iowa: The state’s Business Conditions Index for April improved to 55.3 from 51.8 in March. Components of the overall April index were: new orders at 59.3; production or sales at 51.9; delivery lead time at 58.1; employment at 47.8; and inventories at 59.3. According to the latest month’s U.S. Bureau of Labor Statistics data, involuntary job losses expanded by 1,000, or 5.9%, over the past 12 months in Iowa.   

Kansas: The Kansas Business Conditions Index for April expanded to 51.5 from March’s 45.6.  Components of the leading economic indicator from the monthly survey of supply managers for April were: new orders at 58.7; production or sales at 51.6; delivery lead time at 56.6; employment at 38.8; and inventories at 51.9.  According to the latest month’s U.S. Bureau of Labor Statistics data, involuntary job losses fell by 1,000, or 6.7%, over the past 12 months in Kansas.   

Minnesota: The April Business Conditions Index for Minnesota climbed to 52.4 from 47.4 in March. Components of the overall April index were: new orders at 58.8; production or sales at 51.7; delivery lead time at 57.0; inventories at 53.7; and employment at 41.0. According to the latest month’s U.S. Bureau of Labor Statistics data, involuntary job losses soared by 37,000, or 132.1%, over the past 12 months in Minnesota.   

Missouri: The state’s April Business Conditions Index expanded to 55.5 from 53.8 in March. Components of the overall index from the survey of supply managers for April were: new orders at 59.1; production or sales at 52.0; delivery lead time at 58.2; inventories at 59.7; and employment at 48.4. According to the latest month’s U.S. Bureau of Labor Statistics data, involuntary job losses fell by 4,000, or 13.8%, over the past 12 months in Missouri.

Nebraska: After two straight months of below growth neutral readings, Nebraska’s Business Conditions Index moved above the 50.0 threshold.  The overall reading for April increased to 50.1 from 49.7 in March. Components of the index from the monthly survey of supply managers for April were: new orders at 58.5; production or sales at 51.5; delivery lead time at 56.0; inventories at 49.0; and employment at 35.3.  According to the latest month’s U.S. Bureau of Labor Statistics data, involuntary job losses were unchanged over the past 12 months in Nebraska.

North Dakota:  For a second straight month, the state’s overall index fell below growth neutral. The state’s overall, or Business Conditions Index, increased slightly to 44.8, a regional low, from March’s 43.9.  Components of the overall index for April were: new orders at 57.4; production or sales at 50.3; delivery lead time at 51.2; employment at 39.0; inventories at 51.2.  According to the latest month’s U.S. Bureau of Labor Statistics data, involuntary job losses were unchanged over the past 12 months in North Dakota.

Oklahoma: The state’s Business Conditions Index expanded to a solid 54.7 from March’s 53.3. Components of the overall April index were: new orders at 59.0; production or sales at 51.9; delivery lead time at 57.9; inventories at 58.2; and employment at 46.6. According to the latest month’s U.S. Bureau of Labor Statistics data, involuntary job losses fell by 1,000, or 5.3%, over the past 12 months in Oklahoma.

South Dakota: The April Business Conditions Index for South Dakota bounced to a third consecutive high of 61.4 from March’s 60.8. Components of the overall index were: new orders at 53.0; production or sales at 60.1; delivery lead time at 62.3; inventories at 79.6; and employment at 52.0. According to the latest month’s U.S. Bureau of Labor Statistics data, involuntary job losses fell by 1,000, or 16.7%, over the past 12 months in South Dakota.

Survey results for the month of May will be released on June 3, 2024, the first business day of the month.

See his interview here.