The Creighton University Mid-America Business Conditions Index, a leading economic indicator for the 9-state region stretching from Minnesota to Arkansas, rose above growth neutral for the 23rd straight month.
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 a still healthy 65.9 from March’s very strong 71.3.
“Creighton’s monthly survey results indicate the region continues to add manufacturing activity at a healthy pace but with significant inflationary pressures. Supply chain disruptions and labor shortages remain as chief challenges for firms in the region,” 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.
Even with solid economic activity, all suppliers were not optimistic about the economy. As reported by one supply manager, “Europe is suffering from the war in Ukraine. Some paper mills have incurred (significant) down-time due to lack of raw materials. I believe it will get much worse.”
Approximately four of 10 supply managers expect supply chain disruptions to worsen, while only two of 10 anticipate an improvement in these disruptions.
Over half of survey participants (56.7%) reported that the rising costs of materials for suppliers was the prime factor pushing input prices higher. Approximately 13.5% named transportation delays as the prime factor driving input prices higher, while only 10.0% and 6.7% identified higher fuel energy prices and labor costs, respectively, as factors pushing input prices higher.
The remaining 13.1% named other factors, such as supplier profits, as causes of higher input prices.
“Given current significant inflationary pressures, I expect a rate hike of one-half of one percentage point at each of the Fed’s next two rate setting committee meetings, May 3-4 and June 14-15, even as recession signals have grown over the last several months,” Goss said.
According to the U.S. Bureau of Labor Statistics, commodity prices are up approximately 20.5% over the last 12 months with farm products advancing by 34.0%, metal products expanding by 28.9% and fuels soaring by 40.0%.
Despite supply chain bottlenecks, regional trade numbers were positive for the month. The new export orders index stood at 61.6, down from March’s 70.6, while the regional import reading rose to 59.5 from 58.7 in March.
Other survey components of the April Business Conditions Index were: new orders sank to 71.5 from 73.4 in March; the production or sales index fell to 63.8 from 75.0 in March; and the speed of deliveries of raw materials and supplies declined to 71.7 from March’s 80.6. This lower reading indicates a reduction in supply chain disruptions and delays.