Ernie Goss

PRESS RELEASE

by Ernie Goss, Ph.D. and John Nyatowa

July 2023 Survey Highlights:

• Overall index falls to its lowest level since the last recession in 2020.

• On average, 45.9% of supply managers expect a recession in the second half of 2023.

• Creighton’s monthly survey indicates that manufacturing job losses over the past two months will increase in the months ahead.  

• The wholesale inflation gauge for the month declined to 52.2 from June’s 67.4.

• On average, supply managers expect wholesale prices for the products and services their firms purchase to climb by 4.8% over the next 12 months.  

• For the first five months of 2023, compared to the same period in 2022, the region expanded exports by 3.0%.

• Goss expects the Federal Reserve to hold short-term interest rates at their current level at its next meetings on Sept. 19-20.

OMAHA, Neb. (Aug. 1, 2023) — After climbing above growth neutral for five straight months, the Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, fell below the growth neutral threshold.

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, dropped to 46.1 from 50.8 in June.

“This is the lowest overall reading since the beginning of the pandemic in May 2020,” 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.

“Creighton University’s survey results indicate that contrary to the Federal Reserve consensus, a recession in 2023 is still ‘on the table.’ On average, 45.9% of supply managers expect a recession in the second half of 2023,” said Goss.

“I expect weak readings from surveys such as Creighton’s between now and the middle of September to push the Federal Reserve to cease rate hikes at their interest rate setting committee meeting on Sept. 19-20,” said Goss.

Employment: The regional hiring gauge slumped below growth neutral to 45.6 from June’s 50.0. According to U.S. Bureau of Labor Statistics data, seasonally adjusted manufacturing employment in the region has decreased for two consecutive months. Creighton’s monthly survey results indicate these manufacturing job losses will increase in the months ahead.  

“For some time, Creighton’s monthly survey has indicated steady employment growth and levels have been maintained due to manufacturers’ labor hoarding. However, this month’s hiring gauge is a signal of July layoffs in the region,” said Goss.

Other comments from supply managers in July:

• “Major correction down for some commodities. Classic: in the tight supply, high-demand market of the last few years, manufacturers knew no price constraints and over built inventories and manufacturing capacity.” 

• “I think some industries will fare better than others. Those items where discretionary spending drives the market, such as RVs, jet skis, etc., will probably see tough times. We've already seen that in our customer base. Other areas, like construction and agriculture, seem to be unfazed at the moment.”

• “The cure for high prices is high prices.”

• “Over the last five weeks, butter has risen on CME (Chicago Mercantile Exchange).”

• “Inflation is the liberal way to tax without legislation.”

• “As long as the current administration controls the narrative, media, global cabal and money supply, they control the timing of a recession, which will not happen unless it’s convenient for their political agendas.”

• “If the Republicans take the administration and portions of Congress in 2024, I can guarantee you that a recession will begin due to the political and economic carelessness of the Democrats and Biden Administration.”

• “A New World Order nor global digital currency will be good for the U.S. and only brings us closer to another world war at the hands of the global elites!”

Wholesale Prices: The wholesale inflation gauge for the month plummeted to 52.2 from June’s 67.4 and May’s 74.0. Despite this large decline, supply managers expect wholesale prices for the products and services their firms purchase to increase by 4.8% over the next 12 months.  

According to one supply manager, “Inflation is in labor, materials, transportation, fuel, etc. Everyone in the chain is raising prices and keeping them there.”

Confidence: Looking ahead six months, economic optimism as captured by the July Business Confidence Index was unchanged from June’s weak 32.6. “Approximately 44% of supply managers expect economic growth to decline in the next six months,” said Goss.

However, one survey participant said, “Over the next six months, we are expecting a continued slowdown in the economy but not what would be considered a recession. The outlook for 2024 is positive.”

Inventories: The regional inventory index, reflecting levels of raw materials and supplies, inched up to 52.3 from June’s 52.2. “Manufacturing firms have been expanding inventory levels since the beginning of February this year. This has supported moderate sales growth in the region,” said Goss.

Trade: Trade numbers were once again weak for the month with new export orders slumping to 30.8 from June’s 42.3. July imports nosedived to 35.3 from June’s 58.3. 

Despite the recent downturn in exports, U.S. International Trade Association data indicate that the region expanded exports in the first five months of 2023. Exports expanded to $44.2 billion from $43.0 billion during this same time period in 2022, indicating growth of 3.0%.

Other survey components of the July Business Conditions Index were: new orders fell to 43.5 from 47.7 in June; the production or sales index sank to 41.3 from 50.0 in June; and the speed of deliveries of raw materials and supplies sank to 47.3 from June’s 54.3. The decline indicates a reduction in 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 July Business Conditions Index expanded to 54.6 from 53.9 in June. Components from the July survey of supply managers were: new orders at 43.7; production or sales at 44.8; delivery lead time at 50.8; inventories at 65.7; and employment at 67.8. According to U.S. International Trade Association data, Arkansas exports expanded by 6.4% in the first five months of 2023 compared to 2022 during the same time period. The state’s leading export, transportation equipment, declined by 4.5% from 2022 to 2023.

Iowa: The state’s Business Conditions Index for July slumped to 46.0 from June’s 55.4. Components of the overall July index were: new orders at 43.1; production or sales at 40.4; delivery lead time at 48.0; employment at 48.2; and inventories at 50.2. According to U.S. International Trade Association data, Iowa exports expanded by 7.5% in the first five months of 2023 compared to 2022 during the same time period. The state’s leading export, machinery manufacturing, expanded by 34.1% from 2022 to 2023.

Kansas: The Kansas Business Conditions Index for July fell to 38.9 from 48.6 in June. Components of the leading economic indicator from the monthly survey of supply managers for July were: new orders at 37.5; production or sales at 42.2; delivery lead time at 43.6; employment at 45.6; and inventories at 25.8. According to U.S. International Trade Association data, Kansas exports contracted by 1.3% in the first five months of 2023 compared to 2022 during the same time period. Processed food accounted for the largest portion of the decline with a downturn of 8.6% for 2023.

Minnesota: The July Business Conditions Index for Minnesota sank to 43.3 from 50.2 in June. Components of the overall July index were: new orders at 42.9; production or sales at 39.8; delivery lead time at 47.0; inventories at 44.9; and employment at 41.6. According to U.S. International Trade Association data, Minnesota exports expanded by 0.9% in the first five months of 2023 compared to 2022 during the same time period. The state’s leading export, computers and electronic products, expanded by 7.5% from 2022 to 2023.

Missouri: Missouri’s July Business Conditions Index declined to 52.6 from 53.1 in June. Components of the overall index from the survey of supply managers for July were: new orders at 43.6; production or sales at 41.9; delivery lead time at 50.2; inventories at 62.8; and employment at 64.2. According to U.S. International Trade Association data, Missouri exports expanded by 5.3% in the first five months of 2023 compared to 2022 during the same time period. The state’s leading export, transportation equipment, expanded by 21.7% from 2022 to 2023. 

Nebraska: For a second straight month, Nebraska’s Business Conditions Index slumped below the growth neutral threshold. The overall reading for July sank to 40.4 from 46.1 in June. Components of the index from the monthly survey of supply managers for July were: new orders at 42.7; production or sales at 39.1; delivery lead time at 46.0; inventories at 39.4; and employment at 34.6. According to U.S. International Trade Association data, Nebraska exports contracted by 7.6% in the first five months of 2023 compared to 2022 during the same time period. Processed food accounted for the largest portion of the decline with a downturn of 12.1% from 2022 to 2023.

North Dakota: The state’s Business Conditions Index sank below growth neutral for a second straight month with a July reading of 49.5, which was up from June’s 45.0. Components of the overall index for July were: new orders at 43.5; production or sales at 41.2; delivery lead time at 49.2; employment at 56.8; and inventories at 56.9. According to U.S. International Trade Association data, North Dakota exports expanded by 29.0% the first five months of 2023 compared to the same time-period in 2022. The state’s leading export, petroleum products, expanded by 68.5% from 2022 to 2023.

Oklahoma: Oklahoma’s Business Conditions Index slumped below growth neutral for a second straight month. The July index dropped to 41.1 from 45.5 in June. Components of the overall July index were: new orders at 42.6; production or sales at 38.6; delivery lead time at 45.3; inventories at 35.4; and employment at 43.4. According to U.S. International Trade Association data, Oklahoma exports fell by 10.8% in the first five months of 2023 compared to 2022 during the same time period. The state’s leading export, machinery manufacturing, contracted by 9.2% from 2022 to 2023.

South Dakota: The July Business Conditions Index for South Dakota declined to 43.9 from 52.8 in June. Components of the overall index were: new orders at 43.0; production or sales at 39.9; delivery lead time at 47.2; inventories at 46.1; and employment at 43.1. According to U.S. International Trade Association data, South Dakota exports expanded by 12.3% in the first five months of 2023 compared to 2022 during the same time period. The state’s leading export, processed foods, expanded by 0.6% from 2022 to 2023. 

Survey results for the month of August will be released on Sept. 1, 2023, the first business day of the month.