Following is the text from the Mid- America Business Conditions Survey of supply managers and business leaders in the region from Creighton University.
The monthly Mid-America Business Conditions Index, a leading economic indicator for a nine-state region, dipped for the month. The index continues to point to improving economic growth for the region in the next three to six months.
Overall index: The Business Conditions Index, which ranges between 0 and 100, declined to a solid 56.8 from March’s even healthier 58.2.
“Durable goods producers in the region continue to outperform nondurable goods manufacturers. Durable goods manufacturers reported strong growth in new orders from both domestic and international buyers. Despite this healthy growth, inflationary pressures at the wholesale level remain restrained,” said Ernie Goss, Ph.D., director of Creighton University’s Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics.
After moving below growth neutral for January, the region’s employment gauge has climbed above 50.0 for the past three months. The April reading rose to 60.7 from March’s 56.3. “Companies in the region are increasing the pace of new hiring. For the entire region, I expect the employment to rise to pre- recession levels this summer. At this point in time, the region’s employment level is off less than one-half of a percentage point from pre-recession levels. Of course this differs by state with Arkansas, Kansas and Missouri lagging well behind the remainder of the states,” said Goss.
The prices-paid index, which tracks the cost of purchased raw materials and supplies, sank to 62.6 from 64.1 in March. “Inflationary pressures at the wholesale level are clearly trending lower. Thus far, the Federal Reserve’s cheap money policy is elevating inflationary pressures, but only modestly. The bigger problem in Mid-America has been the Fed’s impact on asset prices such as farmland which continue to expand at rates that should concern agriculture interests,” said Goss.
Looking ahead six months, economic optimism, as captured by the April business confidence index, expanded to 59.9 from 58.2 in March. “Supply managers expect the upturn in housing to remain an important ingredient of the economic expansion. The federal spending sequestration is having almost no impact on the outlook. The last two months, we have asked supply managers how the federal spending sequestration was affecting their company. More than three-fourths of supply managers in March and April indicated that the cuts have had no impact on their company to date. Less than one-fourth reported only modest impacts. None of the businesses reported significant impacts,” said Goss.
This month we also asked supply managers the expected outcome from the Affordable Care Act. Approximately fifty percent have experienced, or expect to experience negative impacts. Only 2 percent anticipate positive impacts, while the remaining 48 percent expect little or no impact on their business.
Regional inventory levels increased for the month but at a slower pace compared to March. The April inventory index slumped to 50.6 from March’s 58.1. “Companies in our survey have now expanded inventory levels for five straight months. This inventory accumulation will add to regional growth in the months ahead. This is another indicator of improving business confidence,” said Goss.
New export orders improved for the month. The new export orders index increased to a 54.5 from 50.9 in March. In another signal of an expanding regional economy, the import index advanced for a third straight month to 58.4 from March’s 55.0 and 53.7 in February. “Upturns in production have pushed supply managers to increase their purchases from abroad. While the increase in new export orders for the month is good news, we will need to experience several months of this growth to be confident that exports are once again adding to regional growth,” said Goss.
Other components of the April Business Conditions Index were new orders at 61.3, down from March’s very strong 65.4; production or sales at 63.2, up from 62.4; and delivery lead time at 48.5, down from 49.0 in March.
Survey results for May will be released on the first business day of the month June 3.
SOURCE: Mid-America Business Conditions Survey, http:/www.outlook-economic.com
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