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November Mid-America Survey Flashes Warning Signals
North Dakota Ag Connection - 12/02/2022

The Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, fell below growth neutral for the first time since early in the pandemic, May 2020.

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, sank to 48.0 from 53.1 in October.

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

"For the first time since the end of the 2020 recession in May 2020, Creighton's monthly survey of manufacturing supply managers is flashing recession warnings for the first half of 2023. Since climbing to a 2022 high in March, the overall index has now fallen six of the past eight months," 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.

"One in four supply managers rate higher input prices as the greatest 2023 challenge," said Goss.

Employment: Despite solid growth in monthly economic activity over the past several months, manufacturers in the region have added jobs at only a modest pace. The November employment index dropped to 45.0 from 46.3 in October. This is the first time since the early days of the pandemic, June/July 2020, that the survey has registered two straight months of job losses.

"Due to labor shortages, approximately 65% of firms reported shortages of job applicants for available jobs," said Goss.

Four of the nine Mid-America states have non-farm seasonally adjusted employment levels that are above pre-pandemic levels. These states are Arkansas, Missouri, Nebraska and South Dakota. The remaining five states, Iowa, Kansas, Minnesota, Oklahoma and North Dakota, have non-farm, seasonally adjusted employment levels below their pre-pandemic levels.

Other November comments from supply managers were:

- "The Democrats did a real disservice to this country ... while Republicans sat on their hands watching it all go down!"

- "It would appear there is a slight improvement in (work) candidate flow. We have seen this in the past as non-committed (work) candidates look for pre-holiday work."

Wholesale Prices: The wholesale inflation gauge for the month expanded to an inflationary 72.5 from 65.4 in October. "As result of continued elevated inflationary pressures, I expect the Federal Reserve to announce an interest rate hike of 50 basis points (0.50%) to combat inflation at its next meetings on December 13-14," said Goss.

Confidence: Looking ahead six months, economic optimism as captured by the November Business Confidence Index increased to a very weak 25.0 from 18.5 in October. "Confidence indices for each month in 2022, all below growth neutral, are the worst string of readings since the 2008-09 recession," said Goss.

Inventories: The regional inventory index, reflecting levels of raw materials and supplies, dropped to 45.5 from October's 65.5. "After months of stockpiling inventories, manufacturing firms have begun returning inventory to normal levels," said Goss.

Trade: Trade numbers were weak for November with export orders falling to 50.0 from 52.9 in October. Additionally, firms continue to report weak imports due to a weakening regional economy. The November reading dropped to a weak 39.3 but was up from 35.0 in October.

Other survey components of the November Business Conditions Index were: new orders sank to 47.5 from 55.8 in October; the production or sales index slumped to 47.4 from 57.4 in October; and the speed of deliveries of raw materials and supplies increased to 52.5 from October's 48.1. This higher reading indicates an upturn in supply chain disruptions and more delays 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.

For a third straight month, the North Dakota Business Conditions Index climbed above growth neutral with a November reading of 53.5 from 57.5 in October. Components of the overall index for November were: new orders at 48.0, production or sales at 49.3, delivery lead time at 55.2, employment at 55.3 and inventories at 59.8. The latest U.S. Bureau of Labor Statistics data indicate that over the past 12 months, private wages of all workers in North Dakota expanded by 9.8%, and manufacturing wages climbed by 4.2%.

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