Midwest starts 2019 with strong economic outlook STATE BY STATE INFO

Creighton University Mid-America Business Conditions Index

OMAHA, Nebraska - The Midwest economy starts 2019 with strong growth. State-by-state reports are below.

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

The Business Conditions Index, which ranges between 0 and 100, climbed to 56.0 from December’s 55.2. This is the 26th 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, shortages of skilled workers and international trade tension/tariffs remain an impediment to even stronger growth. More than eight of 10 supply managers reported buying from abroad was an important factor in company success,” 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.

Employment: The January employment index expanded to a healthy 58.5 from December’s much weaker 50.0.

“Overall manufacturing employment growth in the region over the past 12 months has been very healthy at 2.4 percent, compared to a lower 2.3 percent for the U.S,” said Goss. “I expect this gap to close in the months ahead as regional job growth slows faster than national manufacturing job growth. Regional job growth for durable goods producers has been approximately three times that of nondurable goods manufacturers over recent months.”

Wholesale Prices: The wholesale inflation gauge continues to indicate elevated inflationary pressures. The January price index climbed to 76.3 from December’s 69.5.

Both Creighton’s regional wholesale inflation index and the U.S. inflation gauge are elevated. Tariffs and expanding growth, for example, have boosted steel prices by 18.7 percent over the past 12 months. At the consumer level, the consumer price index advanced by an acceptable 1.9 percent over the past 12 months.

“I expect lower oil prices and slowing growth to push both wholesale and consumer inflation lower,” Goss said. “Due to prices at the consumer level moving at an acceptable pace, I do not expect the Federal Reserve to raise interest before its June meetings,” said Goss.

Confidence: Looking ahead six months, economic optimism, as captured by the January Business Confidence Index, fell to 53.7, from December’s 54.1, its lowest level in three years.

“However, I expect business confidence to depend heavily on trade talks with China. Approximately one in five supply manager reported that access to international markets was essential to their firm’s success, while 34.2 indicated that this access was either important or very important. Only 19 percent indicated that access to international markets was not important,” reported Goss.

Inventories: Companies expanded inventories of raw materials and supplies for the month. The January inventory index jumped to 57.7 from December’s 47.4.

Trade: The regional trade numbers for January were mixed with imports heading higher and new export orders remaining weak. The new export orders index moved slightly higher to a weak 48.3 from December’s 48.1, and the import index soared to 54.4 from 41.1 in December. “Despite higher tariffs on imported goods, healthy regional growth boosted imports for the month, but slower global growth reduced new export orders,” said Goss.

Other survey components: Components of the Business Conditions Index were new orders at 56.2, up from December’s 55.5; the production or sales index at 53.9, down from 55.4 in December; and speed of deliveries of raw materials and supplies index down sharply to 53.7 from last month’s 67.6.

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.

Nine state-by-state reports

Arkansas: The January Business Conditions Index for Arkansas rose to 54.6 from December’s 50.5. Components of the index from the monthly survey of supply managers were new orders at 55.4, production or sales at 52.6, delivery lead time at 51.3, inventories at 56.6, and employment at 57.1. “Over the past 12 months, nondurable goods manufacturers in the state have expanded jobs by a healthy 2.0 percent, while Arkansas durable goods producers have added jobs at an even stronger pace of 2.8 percent,” said Goss.

Iowa: The January Business Conditions Index for Iowa expanded to 54.8 from December’s 53.5. Components of the overall index from the monthly survey of supply managers were new orders at 57.8, production or sales at 52.2, delivery lead time at 50.9, employment at 56.7, and inventories at 56.2. “Over the past 12 months, nondurable goods manufacturers in the state have expanded jobs by a very healthy 2.8 percent, while Iowa durable goods producers have added jobs at an even stronger pace of 3.9 percent,” said Goss.

Kansas: The Kansas Business Conditions Index for January increased to 53.3 from December’s 49.7. Components of the leading economic indicator from the monthly survey of supply managers were new orders at 54.3, production or sales at 51.2, delivery lead time at 49.9, employment at 55.7, and inventories at 55.1. “Over the past 12 months, nondurable goods manufacturers in the state have expanded jobs by a healthy 2.2 percent, while Kansas durable goods producers have added jobs at an even stronger pace of 4.1 percent,” said Goss.

Minnesota: The January Business Conditions Index for Minnesota declined to 54.5 from December’s 55.5. Components of the overall January index from the monthly survey of supply managers were new orders at 52.8, production or sales at 53.2, delivery lead time at 54.8, inventories at 53.2, and employment at 58.5. “Over the past 12 months, nondurable goods manufacturers in the state have expanded jobs by a solid 1.2 percent, while Minnesota durable goods producers have added jobs at a strong pace of 3.0 percent,” said Goss.

Missouri: The January Business Conditions Index for Missouri climbed to 55.0 from 53.9 in December. Components of the overall index from the survey of supply managers were new orders at 55.7, production or sales at 53.0, delivery lead time at 51.6, inventories at 57.1, and employment at 57.4. “Over the past 12 months, nondurable goods manufacturers in the state have shed jobs at a pace of minus 1.6 percent, while Missouri durable goods producers have added jobs at a healthy pace of 3.0 percent,” said Goss.

Nebraska: After dipping below growth neutral for December, the January Business Conditions Index for Nebraska advanced to 50.5 from December’s 49.7. Components of the index from the monthly survey of supply managers were new orders at 52.0, production or sales at 48.3, delivery lead time at 47.1, inventories at 52.1, and employment at 53.0. “Over the past 12 months, nondurable goods manufacturers in the state have expanded jobs by a very healthy 4.4 percent, while Nebraska durable goods producers have added jobs at a somewhat slower but still very healthy pace of 3.9 percent,” said Goss

North Dakota: The January Business Conditions Index for North Dakota fell to 49.8 from 52.6 in December. Components of the overall index were new orders at 51.3, production or sales at 47.6, delivery lead time at 49.8, employment at 52.2, and inventories at 51.2. “Over the past 12 months, nondurable goods manufacturers in the state have experienced no change in employment, while North Dakota durable goods producers have added jobs at a solid pace of 1.2 percent,” said Goss.

Oklahoma: Oklahoma’s Business Conditions Index has remained above the 50.0 threshold for the last 18 straight months. The overall index from a monthly survey of supply managers advanced to 57.1 from 56.4 in December. Components of the overall January index were new orders at 56.4, production or sales at 53.8, delivery lead time at 59.3, inventories at 57.9, and employment at 58.2. “Over the past 12 months, nondurable goods manufacturers in the state have experienced job losses of minus 4.9 percent while Oklahoma durable goods producers have added jobs at a very healthy 4.2 percent pace,” said Goss.

South Dakota: The January Business Conditions Index for South Dakota climbed to a regional high of 66.2 from December’s 63.1, also a regional high. Components of the overall index from the January survey of supply managers in the state were new orders at 65.0, production or sales at 64.6, delivery lead time at 63.0, inventories at 69.6, and employment at 68.6. “Over the past 12 months, nondurable goods manufacturers in the state have expanded jobs by a healthy 3.2 percent, while South Dakota durable goods producers have added jobs at a somewhat slower, but still strong, pace of 2.8 percent,” said Goss.

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