Overall index: After falling below growth neutral for March, the overall index has remained in recessionary territory for two straight months. The Business Conditions Index, which ranges between 0 and 100, increased to 43.5 from April’s 35.1, but down from March’s 46.7.
“According to Creighton’s May survey of regional manufacturing supply managers, COVID-19 had a less significant impact on the manufacturing sector than other areas of the economy more directly tied to the consumer. This is a consumer led recession with manufacturing lagging. Nonetheless, Creighton’s survey indicates that the regional manufacturing sector is trapped in a recession,“ 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 May employment index continued to indicate job losses, but at a slower pace than in April. The May index rose to 40.0 from April’s record low of 26.2.
“In the middle of March U.S. Department of Labor data showed that only 160,170 workers in the nine-state region were unemployed and receiving unemployment insurance benefits. This represented only 1.3% of individuals covered by the unemployment insurance system. By the first week of May 1,328,520 workers were receiving unemployment insurance benefits, or 10.5% of covered workers,” said Goss.
As a result of COVID-19: 34% of firms extended the period of paying outstanding invoices; 35.9% revised or cancelled contracts; and 28.2% moved purchases from foreign sources to domestic sources.
Wholesale Prices: The wholesale inflation gauge for the month indicated deflationary pressures at the wholesale level with a wholesale price index of 48.6 for May, which was up from 44.0 in April.
“I expect to see deflationary pressures at the wholesale level in the weeks and months ahead despite the Federal Reserve’s, and the U.S. government’s record economic stimulus programs,” said Goss.
Comments from supply managers from the May survey included:
- “With most of our business coming from the public sector, I expect a subdued peak season and a meager winter as states and municipalities tighten fiscal belts for the foreseeable future.”
- “Trusted business relationships are more valuable than ever.”
- “Our management team will evaluate bringing more people back (from home office) in phases after two weeks.”
- “The beginning of May was horrible for sales and employment, with a slight uptick expected toward the end of May….nowhere near what it was in February (far below).”
Confidence: Looking ahead six months, economic optimism, as captured by the May Business Confidence Index, rebounded to 56.6 from April’s weak 45.5.“The federal stimulus plan, the Federal Reserve monetary incentive programs, and the rebound in U.S. stock markets boosted confidence from April’s low reading,” said Goss.
Inventories: The regional inventory index for May, reflecting levels of raw materials and supplies, climbed to 48.6 from last month’s 36.9.
Trade: The regional trade numbers were very negative for the month with new export orders tumbling to a record low of 15.9 from April’s 19.4. Imports fell to 36.0 from 38.7 in April.
Other survey components: Other components of the May Business Conditions Index were new orders at 31.7, up from April’s 21.0; the production or sales index expanded to 33.3 from April’s 23.3; and speed of deliveries of raw materials and supplies index at 63.8 was down from last month’s 68.3.
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 (ISM), formerly the National Association of Purchasing Management. The Mid-America report is produced independently of the national ISM.
Arkansas: The May Business Conditions Index for Arkansas rose to 43.7 from April’s 35.1. Components of the May index from the monthly survey of supply managers were: new orders at 32.8, production or sales at 34.1, delivery lead time at 60.9, inventories at 49.6, and employment at 41.1. “The state’s unemployment rate (not seasonally adjusted) jumped from 4.9% in March to 10.3% in April. The state lost 102,000 jobs in this one-month covid-19 span,” said Goss.
Iowa: Iowa’s Business Conditions Index, or overall index, once again slumped below growth neutral. However, the reading climbed to a weak 41.9 from 34.4 in April. Components of the overall May index from the monthly survey of supply managers were: new orders at 31.1, production. or sales at 34.5, delivery lead time at 57.6, employment at 39.0, and inventories at 47.1. “The state’s unemployment rate (not seasonally adjusted) jumped from 3.6% in March to 10.7% in April. The state lost 177,000 jobs in this one-month covid-19 span,” said Goss.
Kansas: The Kansas Business Conditions Index for May increased to 42.8 from April’s 36.3. Components of the leading economic indicator from the monthly survey of supply managers for May were: new orders at 32.7, production or sales at 30.1, delivery lead time at 60.7, employment at 41.0, and inventories at 49.5. “The state’s unemployment rate (not seasonally adjusted) jumped from 2.9% in March to 11.6% in April. The state lost 130,000 jobs in this one-month covid-19 span,” said Goss.
Minnesota: The May Business Conditions Index for Minnesota increased to 39.8 from 34.8 in April. Components of the overall May index from the monthly survey of supply managers were: new orders at 27.1, production or sales at 34.6, delivery lead time at 56.7, inventories at 42.3, and employment at 38.5. “The state’s unemployment rate (not seasonally adjusted) jumped from 3.5% in March to 8.6% in April. The state lost 360,000 jobs in this one-month covid-19 span,” said Goss.
Missouri: The May Business Conditions Index for Missouri climbed to 42.3 from 35.1 in April. Components of the overall index from the survey of supply managers for May were: new orders at 31.5, production or sales at 34.4, delivery lead time at 58.5, inventories at 47.8, and employment at 39.5. “The state’s unemployment rate (not seasonally adjusted) jumped from 3.9% in March to 9.8% in April. The state lost 305,000 jobs in this one-month covid-19 span,” said Goss.
Nebraska: The state’s overall index for May rose to 43.9 from 36.0 in April. Components of the index from the monthly survey of supply managers for May were: new orders at 32.9, production or sales at 34.1, delivery lead time at 61.2, inventories at 49.9, and employment at 41.3.
“The state’s unemployment rate (not seasonally adjusted) jumped from 4.2% in March to 8.6% in April. The state lost 86,000 jobs in this one-month covid-19 span,” said Goss.
North Dakota: The May Business Conditions Index for North Dakota climbed to 43.4 from 35.8 in April. Components of the overall index for May were: new orders at 32.5, production or sales at 34.2, delivery lead time at 60.3, employment at 40.7, and inventories at 49.2. “The state’s unemployment rate (not seasonally adjusted) jumped from 2.7% in March to 9.2% in April.
The state lost 43,000 jobs in this one-month covid-19 span,” said Goss.
Oklahoma: Oklahoma’s Business Conditions Index once again moved below growth neutral in May. The overall index for May advanced to a weak 43.0 from April’s 34.2. Components of the overall May index were: new orders at 32.1, production or sales at 34.3, delivery lead time at 59.7, inventories at 48.7, and employment at 40.3. “The state’s unemployment rate (not seasonally adjusted) jumped from 3.0% in March to 14.3% in April. The state lost 131,000 jobs in this one-month covid-19 span,” said Goss.
South Dakota: The May Business Conditions Index for South Dakota increased to 43.8 from April’s 35.9. Components of the overall index from the May survey of supply managers in the state were: new orders at 32.9, production or sales at 34.1, delivery lead time at 61.2, inventories at 49.9, and employment at 41.3. “The state’s unemployment rate (not seasonally adjusted) jumped from 3.4% in March to 12.0% in April. The state lost 36,000 jobs in this one-month covid-19 span,” said Goss.
Survey results for June will be released on Wednesday, July 1, the first business day of the month.
Follow Goss on Twitter at http://twitter.com/erniegoss
For historical data and forecasts visit our website at
http://business.creighton.edu/
