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Mid-America Index: Manufacturing Advances Again
Nebraska Ag Connection - 04/10/2019

The March Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, rose to its highest level since August of last year signaling solid growth for the region over the next three to six months.

Overall index: The Business Conditions Index, which ranges between 0 and 100, climbed to 58.2 from February's 57.9. This is the 28th straight month the index has remained above growth neutral 50.0.

"The regional economy continues to expand at a positive pace. However, as in recent months, international trade tension/tariffs and the global economic slowdown remain obstacles to even stronger growth. Approximately, 22 percent of supply managers reported that their firm was experiencing negative impacts from recent floods," 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.

Approximately 14 percent of firms reported strong economic growth in their area while an almost equal 14 percent of businesses indicated economic downturns in their local area.

Employment: The March employment index fell to a solid and positive 56.4 from February's 59.0.

"Overall manufacturing employment growth in the region over the past 12 months has been very healthy and exceeded that of the nation," said Goss. "However, overall employment growth for the region over the past 12 months at 0.5 percent is well below national job growth of 1.5 percent," said Goss.

About 10 percent of businesses reported layoffs for the month while 64 percent indicated new hiring for the month.

Wholesale Prices: The wholesale inflation gauge for the month indicated elevated inflation with a March price gauge of 74.5 which was up from 64.1 in February. "I expect tariffs and flood impacts to boost the inflation index higher in the months ahead," said Goss.

Confidence: Looking ahead six months, economic optimism, as captured by the March Business Confidence Index, slipped to a still solid 57.2 from February's 58.8.

"However, I expect business confidence to depend heavily on trade talks with China as well as U.S. economic growth in the weeks and months ahead," reported Goss.

Inventories: Companies expanded inventories of raw materials and supplies for the month, but at a slower pace than in February. The March inventory index declined to 52.2 from 57.8 in February.

Trade: The regional trade numbers for March were solid, but with both imports and exports slipping for the month. The new export orders index moved lower to 53.4 from February's 55.6, and the import index fell to 51.7 from 54.8 in February.

"Across the region the export of agriculture commodities remains very important with a total of $6.8 billion for 2018 which represented a gain of 8.1 percent from 2017. In 2018, the export of agriculture commodities produced approximately $20 billion in overall economic activity in the Mid-America supporting a total of 96,000 jobs in the region," said Goss.

Other survey components: Components of the March Business Conditions Index were new orders at 58.8, up from February's 55.3; the production or sales index at 60.9 was up significantly from 53.9 in February; and speed of deliveries of raw materials and supplies index at 62.7 was down from last month's 63.8.

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.

The forecasting group's overall index, referred to as the Business Conditions Index, ranges between 0 and 100. An index greater than 50 indicates an expansionary economy over the course of the next three to six months. The Business Conditions Index is a mathematical average of indices for new orders, production or sales, employment, inventories and delivery lead time. This is the same methodology, used since 1931 by the Institute for Supply Management, formerly the National Association of Purchasing Management.

After dipping below growth neutral for December, Nebraska's Business Conditions Index has moved above the threshold of 50.0 each month since. Nebraska's overall index expanded to 57.1 from February's 52.4. Components of the index from the monthly survey of supply managers were new orders at 58.0, production or sales at 60.4, delivery lead time at 61.2, inventories at 50.9, and employment at 55.0. "In 2018, Nebraska exported $1.0 billion in agriculture commodities, which represented a growth of 8.4 percent over 2017 levels. In 2018, the export of agriculture commodities produced $2.9 billion in overall economic activity in the state supporting a total of 14,000 jobs in the state," said Goss.

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