The Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, rose above growth neutral for the 21st straight month.
Overall Index: The Business Conditions Index, which uses the identical methodology as the national ISM, ranges between 0 and 100 with 50.0 representing growth neutral, climbed to 64.0 from January's 56.2.
"Creighton's monthly survey results indicate the region continues to add manufacturing activity at a healthy pace, but with only modest job additions. The Russian invasion into Ukraine will lengthen supply chain disruptions and push commodity prices upward. Interruptions in trade flows will also weaken the regional recovery which was already slowing significantly," said Ernie Goss, Ph.D., director of Creighton University's Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics in the Heider College of Business.
As reported by one supply manager, "The Russian-Ukraine dispute will disrupt the supply chain even further."
Another supply manager said, "We are starting to see positive resolutions in supply chain issues. We are starting to see pockets of excess capacity in certain areas."
Employment: After three straight months of declines, the regional employment index jumped to a solid 56.6 from 43.6 in January.
"This month the Creighton survey asked supply managers to project wage gains for 2022. On average, supply managers projected a modest 3% growth. Given the shortage of workers, this restrained increase is surprising," said Goss.
Other February comments from supply mangers were:
- "Over the last 18 months our raw materials increased dramatically and were in short supply. Beginning in December our industry slowed down. This alleviated the short supply and the cost of our major raw materials have begun to fall."
- "There is a lot of panic buying in the markets right now."
- "Past government excesses in spending, regulations, and debt will be tough on the economy in 2022."
- "Hiring, and keeping employees is the number one issue. Followed closely by pricing to stay ahead of inflation and of course that relates directly with both the costs and availability of raw materials and the ever-growing problem with shipping. Shipping prices and availability are very concerning."
Wholesale Prices: The wholesale inflation gauge for the month fell to 80.5, indicating excessive inflationary pressures, but down from 87.5 in January. "Creighton's monthly survey is tracking the highest and most consistent inflationary pressures in more than a quarter of a century of conducting the survey," reported Goss.
"Given current significant inflationary pressures, I expect a rate hike at the Fed's next meeting March 15-16. However, the current Russia/Ukraine war will push the Fed to raise the short-term rate by one-fourth of one percentage point instead of a more aggressive one-half percentage point," said Goss.
"According to the U.S. Bureau of Labor Statistics, commodity prices were up approximately 19.3% over the last 12 months with fuels expanding by 35.0%, farm products advancing by 20.5%, and metal products soaring by 38.1%.
Confidence: Looking ahead six months, economic optimism, as captured by the February Business Confidence Index tumbled to a record low of 19.5, and down from 36.2 in January. "Concerns about the impacts of the Russia-Ukraine war, higher interest rates, soaring inflation, and supply chain disruptions combined to hammer business confidence," said Goss.
In terms of 2022 challenges for their firm, more than 43.5% of supply managers ranked supply disruptions as top challenge, more than one-third, or 34.8%, indicated finding and hiring qualified workers, and approximately 17.4% of supply managers named rising input prices as the top challenge.
Inventories: The regional inventory index, reflecting levels of raw materials and supplies, declined to 52.4 from January's 59.7.
Trade: Despite supply chain bottlenecks, regional export numbers were positive for the month. The new export orders index sank to 50.0 from January's 56.7, while the regional import fell to 43.3 from 50.0 in January.
Other survey components of the February Business Conditions Index were: new orders rebounded to 65.0 from 51.7 in January; the production or sales index advanced to 66.7 from 48.3 in January; and the index the speed of deliveries of raw materials and supplies increased to 79.6 from January's 77.8. This higher reading indicates an increase in supply chain disruptions and delays.
"Supply lead times are my biggest issue. It's tough to plan for 14 -16-week lead times," said one supply manager.
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 (ISM), formerly the National Association of Purchasing Management. The Mid-America report is produced independently of the national ISM.
Arkansas: The Business Conditions Index for Arkansas fell to a still solid 59.8 from January's 60.6. Components from the February survey of supply managers were: new orders at 61.2, production or sales at 62.1, delivery lead time at 59.0, inventories at 55.2, and employment at 61.3. Since the beginning of the pandemic, Arkansas' durable goods producers have expanded at a solid and positive pace, while nondurable goods manufacturers in the state have experienced a downturn in overall economic activity.
Iowa: Iowa's Business Conditions Index for February climbed to 60.6 from 56.7 in January. Components of the overall February index were: new orders at 64.5, production, or sales, at 64.6, delivery lead time at 76.4, employment at 51.8, and inventories at 45.7. Since the beginning of the pandemic, Iowa's nondurable goods manufacturers, including food processors, have expanded at a solid pace, while durable goods producers, including metal manufacturers, have experienced pullbacks in economic activity.
Kansas: The Kansas Business Conditions Index for February rose to 62.1 from 53.0 in January. Components of the leading economic indicator from the monthly survey of supply managers for January were: new orders at 64.7, production or sales at 65.3, delivery lead time at 77.8, employment at 53.4, and inventories at 49.2. Since the beginning of the pandemic, nondurable goods manufacturers in Kansas, including food processors, have expanded at a solid pace, while durable goods producers, including transportation equipment manufacturers have experienced pullbacks in economic activity.
Minnesota: The February Business Conditions Index for Minnesota advanced to 70.6 from 61.3 in January. Components of the overall February index were: new orders at 69.4, production or sales at 66., delivery lead time at 85.7, inventories at 68.8, and employment at 63.0. Since the beginning of the pandemic, Minnesota's nondurable goods manufacturers, including food processors, have expanded at a solid pace, while durable goods producers, excluding medical equipment manufacturers, have experienced pullbacks in economic activity.
Missouri: The February Business Conditions Index for Missouri expanded to 68.5 from January's 59.9. Components of the overall index from the survey of supply managers for February were: new orders at 65.8, production or sales at 68.4, delivery lead time at 83.8, inventories at 60.4, and employment at 64.1. Since the beginning of the pandemic, both Missouri's nondurable goods manufacturers, and durable goods producers, have expanded at a solid pace.
Nebraska: Nebraska's overall index for February advanced to 63.2 from 54.6 in January. Components of the index from the monthly survey of supply managers for February: new orders at 64.9, production or sales at 65.8, delivery lead time at 78.8, inventories at 51.7, and employment at 54.7. Since the beginning of the pandemic, Nebraska's nondurable goods manufacturers, including food processors, have expanded at a solid pace, while durable goods producers, including metal manufacturers, have experienced upturns in economic activity.
North Dakota: The February Business Conditions Index for North Dakota climbed and remained above growth neutral at 63.4 from 54.9 in January. Components of the overall index for February were: new orders at 64.9, production or sales at 65.9, delivery lead time at 79.0, employment at 54.9, and inventories at 52.2. Since the beginning of the pandemic, North Dakota's nondurable goods manufacturers, including food processors, have expanded at a solid pace, while durable goods producers have experienced little growth in economic activity.
Oklahoma: Oklahoma's Business Conditions Index expanded above growth neutral in February to 68.1 from 59.6 in January. Components of the overall February index were: new orders at 65.7, production or sales at 68.2, delivery lead time at 83.4, inventories at 60.2, and employment at 63.1. Since the beginning of the pandemic, Oklahoma's nondurable goods manufacturers, including food processors, have expanded at a healthy pace, while durable goods producers, including metal manufacturers, have experienced downturns in economic activity.
South Dakota: The February Business Conditions Index for South Dakota climbed to 50.4 from 45.3 in January. Components of the overall index from the February survey of supply managers in the state were: new orders at 62.7, production or sales at 59.7, delivery lead time at 67.0, inventories at 22.2, and employment at 40.3. Since the beginning of the pandemic, South Dakota's durable goods and nondurable goods manufacturers have expanded at a slow, but positive pace.
Categories: Nebraska, General