Mid-America Manufacturing Index Expands

Mid-America Manufacturing Index Expands
Region Lost Manufacturing Jobs in January
 
January 2024 Survey Highlights:
-The overall, or Business Conditions Index, bounced above growth neutral for a second consecutive month.
-The employment gauge fell to its lowest level since June 2020.
-Every state in the region, except South Dakota, reported January manufacturing job losses.
-The wholesale price gauge rose to a range indicating elevated inflationary pressures.
-Exports of manufactured goods from the nine-state region expanded from $82.9 billion for the first 11 months of 2022 to $86.4 billion for the same period in 2023 for 4.1% growth (U.S. International Trade Administration).

OMAHA, Neb. (Feb. 1, 2024) — After falling below growth neutral in November, the Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, bounced above the 50.0 growth neutral threshold for both December and January.

Overall Index: The Business Conditions Index, which uses the identical methodology as the national Institute for Supply Management (ISM) and ranges between 0 and 100 with 50.0 representing growth neutral, climbed to 50.9 from 50.3 in December.

“Even with the positive gains in readings for December and January, supply managers remained pessimistic regarding the 2024 outlook with only 9.1% expecting a 2024 economic expansion,” 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.

The Mid-America report is produced independently from the national ISM.

As stated by a January survey participant, “We expect the next two quarters to be slower. Cutting back and watching cash in preparation.”

Employment: After climbing to growth neutral 50.0 for December, the employment gauge tumbled to 39.1 in January, its lowest reading since June 2020. “Over the past 12 months, according to U.S. Bureau of Statistics data, the region’s manufacturing sector shed employment by 800 jobs, or -0.1%, compared to a gain of 12,000 U.S. manufacturing jobs, or +0.1%,” said Goss.

As reported by a January survey participant, “Staff was reduced and not replaced.” 

“Even so, 43.5% of firms reported a shortage of job applicants, while 13.0% reported that their firm was not hiring due to an economic slowdown,” said Goss.

Other comments from supply managers in January:
-“Government spending inducing the printing of U.S. dollars and corresponding inflation and national debt is a lawless theft of wealth and security.”
-“Too many economic cross currents to predict.”
-“Things will continue to worsen economically for all of us in the supply chain as long as the current administration pursues its path of political, legal and economic destruction.”  

Wholesale Prices: The wholesale inflation gauge for the month rose to 71.7 from December’s 57.7.  “On average, supply managers expect prices for inputs that their firm purchases to rise by 5.9% in 2024. This is well above wholesale price inflation recently recorded by the U.S. Bureau of Labor Statistics for the 12 months, ending in December 2023,” said Goss.  

“Even though Federal Reserve Chair Powell just yesterday strongly suggested that there would be no interest rate cut in March, I expect upcoming weaker economic data to push the Fed to reduce short-term interest rates at its March 19-20 meetings,” said Goss.

Confidence: Looking ahead six months, economic optimism as captured by the January Business Confidence Index slipped to a very weak 31.9 from December’s 35.2. “Approximately 45.4% of supply managers expect falling business conditions over the next six months,” said Goss.

This month, supply managers were asked to rank the greatest threat to their firm’s 2024 success:

22% ranked an economic recession as the greatest 2024 threat; 21% ranked finding and hiring workers; 17.4% rated higher input prices; 4.4% classified tariffs and trade wars; and the remaining 35.2% named various other issues.

Inventories: The regional inventory index, reflecting levels of raw materials and supplies, increased to 58.7 from December’s 46.0. Said Goss, “The question for January – was this expansion intentional, planned or unplanned due to a sales downturn?”

Trade: Trade numbers were weak for the month with new export orders sinking to 35.8 from December’s 47.0. January’s import reading climbed to a weak 47.3 from 36.9 in December. According to the U.S. International Trade Administration, the export of manufactured goods from the nine-state region expanded from $82.9 billion for the first 11 months of 2022 to $86.4 billion for the same period in 2023 for 4.1% growth.

A supply manager in Creighton’s January survey reported that, “Our industry is affected by inexpensive imports. Even though antidumping has been implemented against foreign imports, there is significant cheating in the supply chain which allows the imports to continue.”

Other survey components of the January Business Conditions Index were: new orders increased to 47.9 from 40.7 in December; the production or sales index slumped to 45.7 from 60.0 in December; and the speed of deliveries of raw materials and supplies decreased to a strong 63.1 from December’s 64.8. The reduction indicates a lessening of supply chain disruptions and delivery bottlenecks 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 of the Mid-America economy. States included in the survey are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.

Below are the state reports:

Arkansas: The state’s Business Conditions Index plummeted to 39.9, a regional low, from 47.0 in December. Components from the January survey of supply managers were: new orders at 46.9; production or sales at 44.3; delivery lead time at 54.3; inventories at 23.3; and employment at 30.9. According to U.S. International Trade Association data, Arkansas’ manufacturing exports expanded from $4.8 billion for the first 11 months of 2022 to $5.1 billion for the same period in 2023, representing a growth rate of 7.4%.

Iowa: The state’s Business Conditions Index for January rose to 51.8 from December’s 49.7. Components of the overall January index were: new orders at 49.6; production or sales at 45.8; delivery lead time at 63.0; employment at 39.9; and inventories at 60.7. According to U.S. International Trade Association data, Iowa’s manufacturing exports expanded from $14.1 billion for the first 11 months of 2022 to $15.1 billion for the same period in 2023, representing a growth rate of 7.0%.

Kansas: The Kansas Business Conditions Index for January dipped to 54.0 from 54.1 in December. Components of the leading economic indicator from the monthly survey of supply managers for January were: new orders at 48.7; production or sales at 46.1; delivery lead time at 64.8; employment at 41.8; and inventories at 68.5. According to U.S. International Trade Association data, Kansas’ manufacturing exports expanded from $10.4 billion for the first 11 months of 2022 to $11.3 billion for the same period in 2023, representing a growth rate of 8.2%.

Minnesota: The January Business Conditions Index for Minnesota strengthened to 56.0 from December’s 55.7. Components of the overall January index were: new orders at 48.9; production or sales at 46.3; delivery lead time at 66.3; inventories at 75.0; and employment at 43.4. According to U.S. International Trade Association data, Minnesota’s manufacturing exports sank from $22.2 billion for the first 11 months of 2022 to $20.5 billion for the same period in 2023, representing a decline of 7.5%.

Missouri: The state’s January Business Conditions Index rose to 50.5 from 46.1 in December. Components of the overall index from the survey of supply managers for January were: new orders at 48.3; production or sales at 45.6; delivery lead time at 62.3; inventories at 57.4; and employment at 39.1. According to U.S. International Trade Association data, Missouri’s manufacturing exports expanded from $13.1 billion for the first 11 months of 2022 to $14.5 billion for the same period in 2023, representing a growth rate of 10.5%.

Nebraska: After three straight months of below growth neutral readings, Nebraska’s Business Conditions Index moved above the threshold to 50.4 for January from 49.4 in December. Components of the index from the monthly survey of supply managers for January were: new orders at 48.2; production or sales at 45.6; delivery lead time at 62.1; inventories at 56.9; and employment at 39.0. According to U.S. International Trade Association data, Nebraska’s manufacturing exports sank from $6.5 billion for the first 11 months of 2022 to $6.2 billion for the same period in 2023, representing a decline of 3.5%.

North Dakota: For a second straight month, the state’s overall, or Business Conditions Index, was 53.9, above growth neutral but down from December’s 54.7. Components of the overall index for January were: new orders at 48.7; production or sales at 46.0; delivery lead time at 64.8; employment at 41.8 and; inventories at 68.3. According to U.S. International Trade Association data, North Dakota’s manufacturing exports expanded from $4.1 billion for the first 11 months of 2022 to $6.1 billion for the same period in 2023, representing a growth rate of 49.7%.

Oklahoma: For the second time in the past three months, the state’s Business Conditions Index sank below growth neutral to 48.7 from December’s 50.5. Components of the overall January index were: new orders at 42.3; production or sales at 45.5; delivery lead time at 61.8; inventories at 55.3; and employment at 38.6. According to U.S. International Trade Association data, Oklahoma’s manufacturing exports sank from $5.8 billion for the first 11 months of 2022 to $5.5 billion for the same period in 2023, representing a decline of 4.3%.

South Dakota: The January Business Conditions Index for South Dakota bounced to a regional high of 56.4 but was down from December’s 57.2, also a regional high. Components of the overall index were: new orders at 50.4; production or sales at 47.7; delivery lead time at 74.8; inventories at 56.7; and employment at 52.2. According to U.S. International Trade Association data, South Dakota’s manufacturing exports expanded from $2.02 billion for the first 11 months of 2022 to $2.03 billion for the same period in 2023, representing a growth rate of 0.3%.

Survey results for the month of February will be released on March 1, 2024, the first business day of the month.