(NewsDakota.com/NDAgConnection.com) — The Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, fell below neutral growth for the third straight month.
Overall Index: The Business Conditions Index, which uses the same methodology as the National Institute for Supply Management (ISM) and ranges from 0 to 100 with 50.0 representing neutral growth, fell to 47.0, down slightly from 47.1 in December .
The Mid-America Report is prepared independently of the national ISM.
“Creighton’s monthly survey of manufacturing supplier managers shows recession warnings for 2023. This was the lowest January reading for the composite or business condition index since 2008, the start of the Great Recession,” said Ernie Goss, PhD, director of the university’s Creighton Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics at Heider College of Business. “The overall index of business conditions has now fallen for eight of the last nine months. Around 60% of supply managers expect the economy to slip into recession in 2023.”
Employment: Despite solid growth in monthly economic activity in recent months, manufacturers in the region have added jobs at a modest pace. Compared to pre-pandemic levels, regional seasonally adjusted nonfarm payrolls fell slightly below pre-COVID-19 pandemic levels in most states in the region.
The index of new hires fell below neutral growth for the third time in four months to 46.3 from a solid 54.2 in December.
“In January, 25.9% of manufacturers reported downsizing, compared to just 8.3% in December,” Goss said.
Other January comments from supply managers included:
– “In the last few weeks some of our distributors seemed to have taken a step back due to staff and product shortages. The worst thing is that there is no prior communication so we are out of product and have to look for a replacement.”
– “Entertainment is the order of the day. Food and beverage sales have increased.”
– “We are heading for a recession.”
– “Recession. The government continues to spend and regulate. We will muddle through.”
– “Need more FTAs.” Wholesale Prices: The wholesale inflation gauge for the month rose to 74.1 from 52.1 in December.
“With the recent moderation in inflationary pressures, I expect the Federal Reserve to announce a more dovish 25 basis point (0.25%) rate hike at its meeting today, Feb. 1, to fight inflation,” Goss said.
Confidence: Looking ahead to the next six months, economic confidence as measured by the January Business Confidence Index rose to a very weak 25.0 from 23.0 in December. “Supply managers cited supply delays and disruptions as the top threats facing their business in 2023,” Goss said.
Inventories: The regional inventory index, which reflects levels of raw materials and supplies, fell to 38.9 from 52.1 in December. “After months of building inventories, manufacturers have started to bring inventories back to normal levels,” Goss said.
Trade: Trade numbers fell in January with export orders falling to 42.8 from 43.3 in December. In addition, companies continue to report weak imports due to a weakening regional economy. The January reading fell to 34.3 from 36.8 in December.
Other survey components of the January Business Conditions Index were: New orders rose to 44.5 from 37.6 in December; the production or sales index rose to 50.0 from 39.6 in December; and the rate of shipments of raw materials and supplies increased to 55.5 from 52.1 in December. This monthly increase indicates major supply chain disruptions with more congestion 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 for Central America’s economy. The states included in the survey are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma, and South Dakota.
For the second straight month, North Dakota’s Business Conditions Index slipped below the growth-neutral line from 45.8 in December to 38.1. Components of the composite index for January were: new orders at 43.1, production or sales at 46.8, delivery time at 50.2, employment at 22.4 and inventories at 27.9. According to payroll data from the US Bureau of Labor Statistics, the state’s average hourly wage, adjusted for inflation, rose 3.3% in 2022.
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