Tulsa, OK – Omaha, Neb. - The December Business Conditions Index for the Mid-America region, a leading economic indicator from a survey of supply managers in a nine-state area, inched above growth neutral. The index expanded to 50.3 from November's 47.5. An index of 50.0 is considered growth neutral.
Readings over the past several months indicate that the regional economic recovery will likely remain weak and fragile. "With the overall index hovering around growth neutral, it is clear to me that the current regional economic expansion will remain weak. The leading economic indicator coming out of this recession is much weaker than the index after the 2001 recession. Economic conditions remain much less healthy for rural areas of the nine-state region," Creighton University Economics Professor Ernie Goss said today.
The region ended the decade on a subdued note from a jobs perspective. The leading states and total job gains were North Dakota gaining 12.5 percent over the decade, South Dakota gaining 7.8 percent; Oklahoma gaining 6.0 percent; Nebraska gaining 4.4 percent; Arkansas gaining 1.8 percent; and Iowa gaining 0.5 percent. Lagging states over the decade were Minnesota losing 0.2 percent of its employment; Missouri losing 1.6 percent; and Kansas losing 0.7 percent. (Detailed information can be found at http://economictrends.blogspot.com )
The regional employment index remained below growth neutral for the month. The December reading of 47.6 was up from November's 46.1. For December 11 percent of supply managers reported job losses while 16 percent indicated their firms reduced employment. "While the overall job market has stabilized, the manufacturing sector continues to shed jobs. Over the past year, the Mid-America region has lost more than 154,000 manufacturing jobs, or more than 10 percent of its manufacturing base. Based on recent survey results, I expect the region to continue to lose manufacturing jobs even as the overall job market stabilizes," said Goss, director of Creighton's Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics.
Rebounding prices have accompanied job losses for the region. The prices-paid index, which tracks the cost of raw materials and supplies, moved above growth neutral for a seventh straight month to 65.2, but down from November's 68.0. "At its December meeting, the Federal Reserve interest rate setting committee said it expects inflation to remain subdued for some time.' Supply manager surveys over the last several months run contrary to the Fed's projection. I expect inflation at the consumer level to approach 3.0 percent as early as the middle of 2010. This is a full percentage point above the Fed's acceptable level," said Goss.
Looking ahead six months, economic optimism, captured by the December confidence index, soared to 69.5 from November's 61.1. "While the labor market has yet to improve, the downturn in layoffs and stabilizing unemployment rates lifted the economic outlook of supply managers in the Mid-America region," said Goss.
Consistent with a weak economy, trade numbers were once again anemic. New export orders inched higher to 51.9 from 50.0 in November, while imports rose to a tepid 48.5 from 47.8 in November. "The weaker U.S. dollar making imported goods more expensive is contributing to the decline in goods purchased from abroad and rising inflationary pressures," said Goss.
Supply managers in the nine-state region continue to reduce inventories. The December inventory index slipped to 39.2 from November's 43.6. "This is the 15th straight month that the inventory index has been below growth neutral. Even as business confidence has grown, we have yet to record any restocking of inventories for raw materials and supplies. Any significant restocking will be a very positive factor for the regional economy," said Goss.
Other components of the December Business Conditions Index were new orders at 55.5, up from 47.3 in November; production or sales at 54.4, up from 46.7; and delivery lead time at 54.7, up from 53.9.
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 Creighton Economic Forecasting Group uses the same methodology as a national survey by the Institute for Supply Management, formerly the Purchasing Management Association, which has formally surveyed its membership since 1931 to gauge business conditions. The 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.
Arkansas: The Arkansas Business Conditions Index for December, based on a survey of supply managers, climbed to 39.4 from November's very weak 33.1. Components of the overall index for December were new orders at 28.1, production or sales at 27.3, delivery lead time at 60.1, inventories at 38.6, and employment at 42.9. "Over the past decade, Arkansas lost almost 47,000, or 22.4 percent, of its manufacturing employment. Most losses were due to productivity growth of almost 20 percent over the decade. While I expect the state to grow overall jobs by 0.3 percent in the first half of 2010, manufacturing job growth will be nil as producers continue to grow output via productivity gains," said Goss.
Iowa: For the first time since August, Iowa's Business Conditions Index slipped below growth neutral. The index, a leading economic indicator from a survey of supply managers, sank to 49.2 from November's 53.4. Components of the overall index for December were new orders at 54.3, production or sales at 55.9, delivery lead time at 54.5, employment at 39.8, and inventories at 41.5. "Over the past decade, Iowa lost almost 45,000, or 18.0 percent, of its manufacturing employment. Most losses were due to productivity growth of almost 50 percent over the decade. While I expect Iowa to grow overall jobs by 0.2 percent in the first half of 2010, manufacturing job growth will be nil as producers continue to grow output via productivity gains," said Goss.
Kansas: The leading economic indicator for Kansas advanced from November's reading. The December Business Conditions Index rose to 44.8 from 42.1 in November. Components of the overall index for December were new orders at 47.4, production, or sales, at 40.0, delivery lead time at 45.6, employment at 42.4, and inventories at 51.7. "Over the past decade, Kansas lost more than 40,000, or 19.9 percent, of its manufacturing employment. Most losses were due to productivity growth of more than 34 percent over the decade. I expect the state's employment level to remain flat for the first half of 2010, even as the state's manufacturing sector sheds jobs at a much slower pace," reported Goss.
Minnesota: Minnesota's leading economic indicator, based on a survey of supply managers, slipped for December. The Business Conditions Index sank to a still healthy 53.5 from 57.1 in November. This was the fifth straight month that the state's index has risen above growth neutral pointing to expanding economic conditions for the first half of 2010. Components of the overall index for December were new orders at 61.7, production, or sales, at 60.7, delivery lead time at 49.0, inventories at 43.7, and employment at 52.6. "Over the past decade, Minnesota lost more than 100,000, or 25.6 percent, of its manufacturing employment. Most losses were due to productivity growth of more than 52 percent over the decade. While I expect the state to grow overall jobs by 0.4 percent in the first half of 2010, manufacturing job growth will be nil as producers grow output via productivity gains," said Goss.
Missouri: For the sixth consecutive month, Missouri's Business Conditions Index was above growth neutral. Even so, the index slipped to 50.1 from November's 50.6. Components of the overall index from the December survey were new orders at 51.6, production, or sales, at 52.9, delivery lead time at 52.2, inventories at 45.3, and employment at 48.5. "Over the past decade, Missouri lost almost 112,000, or 30 percent, of its manufacturing employment. Most losses were due to productivity growth of more than 28 percent over the decade. While I expect the state to grow overall jobs by 0.3 percent in the first half of 2010, manufacturing job growth will be nil as producers grow output via productivity gains," said Goss.
Nebraska: For a fourth consecutive month Nebraska's Business Conditions Index, a leading economic indicator, remained above growth neutral. The December reading, based on a survey of supply managers, dipped slightly to 50.2 from November's 50.6. Components of the overall index for December were new orders at 52.7, production, or sales, at 49.8, delivery lead time at 56.7, inventories at 37.5, and employment at 54.2. "Over the past decade, Nebraska lost almost 22,000, or 19.1 percent, of its manufacturing employment. Most losses were due to productivity growth of more than 48 percent over the decade. While I expect the state to grow overall jobs by 0.2 percent in the first half of 2010, manufacturing job growth will be nil as producers grow output via productivity gains," said Goss.
North Dakota: For a second consecutive month, North Dakota's leading economic indicator was below growth neutral. The December reading, based on a survey of supply managers in the state dipped to 44.3 from 48.4 in November. Components of the overall index for December were new orders at 30.7, production, or sales, at 48.4, delivery lead time at 53.0, employment at 43.8, and inventories at 45.8. "Over the past decade, North Dakota added 700, or 3.0 percent, to its manufacturing employment. This gain was even more remarkable given that manufacturing productivity exceeded 52 percent for the decade. While I expect North Dakota to grow overall jobs by 0.1 percent in the first half of 2010, manufacturing job growth will be nil as producers grow output via productivity gains," said Goss.
Oklahoma: For a fourth straight month, Oklahoma's leading economic indicator from a monthly survey of supply managers dropped below growth neutral. The Business Conditions Index, slipped to 43.0 from November's 49.4. Components of December's overall reading were new orders at 39.5, production, or sales, at 48.9, delivery lead time at 52.7, inventories at 41.1, and employment at 33.0. "Over the past decade, Oklahoma lost almost 46,000, or 25.8 percent, of its manufacturing employment. Most losses were due to productivity growth of almost 40 percent over the decade. While I expect the state to grow overall jobs by 0.2 percent in the first half of 2010, manufacturing job growth will be nil as producers grow output via productivity gains," said Goss.
South Dakota: South Dakota's leading economic indicator sank below growth neutral for the month to 46.0 from 50.2 in November. Components of the overall index for December were new orders at 54.7, production, or sales, at 45.6, delivery lead time at 53.1, inventories at 33.1, and employment at 43.4. "Over the past decade, South Dakota lost more than 7,000, or 17 percent, of its manufacturing employment. Most losses were due to productivity growth of more than 65 percent over the decade. While I expect the state's employment level to remain flat for the first half of 2010, manufacturers in the state will shed jobs for the first two quarters as productivity gains cut into employment levels," said Goss.