The Creighton University Mid-America Business Conditions index shows a nine-state region, stretching from Minnesota to Arkansas, has expanded for a fifth straight month. But not in Oklahoma.
“After flashing recession warning signals between November 2022 and January 2023, Creighton’s monthly survey of manufacturing supply managers over the past several months is now pointing to positive but slow growth with significantly lower inflationary pressures at the wholesale level,” 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 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.
“While it’s too early to tell if the Federal Reserve is achieving its ‘soft landing,’ results from Creighton’s surveys over the last several months are somewhat promising on the inflation front, but with waning economic growth. Even so, I expect the Federal Reserve’s interest rate setting committee, the FOMC, to raise short-term interest rates at its July 25-26 meetings,” said Goss.
The same index showed Oklahoma’s Business Conditions Index slumped in June to a reading below growth neutral. The June index increased to 45.5 from 44.7 in May. Components of the overall June index were: new orders at 47.2; production or sales at 47.7; delivery lead time at 52.5; inventories at 36.9; and employment at 43.2.
According to U.S. International Trade Association data, Oklahoma contracted exports by 10.3% for the first four months of 2023 compared to the same time-period in 2022. Machinery equipment accounted for the largest portion of the decline with a downturn of 11.1%.
Employment: The regional hiring gauge remained in the slow-growth range for a fifth straight month with a reading of 50.0 from May’s 52.3. According to U.S. Bureau of Labor Statistics data, employment in the region expanded by 2.1% over the past 12 months while U.S. employment advanced by a higher 2.7% over the same time-period.
“Employment growth and levels remain solid due to manufacturers’ labor hoarding. That is, manufacturers in the region are maintaining employment levels due to a fear of an inability to hire back once business activity levels pick up,” said Goss.
Other June comments from supply managers were:
• “Business has slowed down some. Prices have been stable for the most part. Some downward movement for some plastics and corrugated.”
• “Inflation and social policies are crippling (have been for two years).”
• “There are a lot of cross currents.”
• “Under the current administration there is little hope for economic leveling as we shift from one extreme to another.”
• “I feel that the recession is going to get worse. I am seeing less freight moving and less heavy machinery is being moved.”
Wholesale Prices: The wholesale inflation gauge for the month declined to 67.4 from May’s 74.0. On average, supply managers expect wholesale prices for the products and services their firm purchases to climb by 0.7% over the next six months.
According to one supply manager, “Prices have been stable for the most part. Some downward movement for some plastics and corrugated.”
Confidence: Looking ahead six months, economic optimism as captured by the June Business Confidence Index increased to a very weak 32.6 from 29.6 in May. “Approximately 48% of supply managers expect economic growth to decline in the next six months,” said Goss.
Inventories: The regional inventory index, reflecting levels of raw materials and supplies, dropped to 52.2 from May’s 59.1. “Manufacturing firms have been expanding inventory levels beginning in February of this year. This will support moderate sales growth in the months ahead,” said Goss.
Trade: Trade numbers were once again weak for the month with new export orders slumping to 42.3 from May’s 46.2. On the other hand, imports climbed to 58.3 from 52.8 in May.
Despite the recent downturn in exports, U.S. International Trade Association data indicate that the region expanded exports for the first four months of 2023. Exports expanded to $35.3 billion from $33.5 billion in 2022 for the same time-period, indicating growth of 5.2%.
Other Survey Components: New orders fell to 47.7 from 52.4 in May; the production or sales index sank to 50.0 from 52.1 in May; and the speed of deliveries of raw materials and supplies climbed to 54.3 from May’s 41.0. The increase indicates an upturn in supply chain disruptions and delivery bottlenecks for the month.