Mid-America Manufacturing Sector Falls for the Month Job Losses Continue with Elevated Inflation

May 2024 Survey Highlights:
For the third time in the past four months, the overall, or Business Conditions Index, sank below growth neutral.
The wholesale price remained at a level indicating elevated inflationary pressures.
Supply managers expect prices for goods and services their company purchases to climb by 4.9% over the next 12 months.
The region’s employment index slumped below growth neutral for a fifth straight month.
Supply managers remained pessimistic regarding the economic outlook with approximately 42% expecting slower economic growth for the remainder of 2024.

OMAHA, Neb. (June 3, 2024) — For a third time in the past four 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 50.0 growth neutral threshold for May.

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 48.2 from April’s 52.5, and represents the third time in 2024 that the index has fallen below growth neutral.

“The overall index, much like the U.S. reading, has vacillated around growth neutral since December of 2023. Additionally, supply managers remained pessimistic regarding the 2024 outlook with approximately 42% expecting slower economic growth for the remainder of 2024,” 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 of the national ISM.

Employment: After climbing to growth neutral for December, the employment gauge has tumbled below 50.0 for the past five months. The May employment index increased to 43.7 from April’s 40.0. “According to the latest U.S. Bureau of Labor Statistics employment data, the region’s manufacturing sector, over the past 12 months, experienced job gains of 0.4% and hourly wage gains of 4.8%, exceeding the rate of inflation by almost two percentage points,” said Goss.    

Other comments from supply managers in May:

“We're already in a recession. Growth of 3% less inflation of 8%.”
“In a political year the incumbents will do anything they can to avoid a recession.....take for example the continued misuse of the oil reserves.”
“Election year - I feel there is some hope in the market but combined with ‘wait and see’ before any big actions.”
“There will be a recession in 2025 as the current administration can no longer suppress it within the government entities they have created and especially if the Republicans take the White House as Biden and the Democrats are waiting for someone to blame.”
“Manufacturing is already in a recession.”
“Biden Economics don't work. We are in a worse position every month.”

Wholesale Prices: The May price gauge slipped to a still too high 70.8, indicating elevated inflation, from 76.0 in April. Supply managers expect input prices to expand by 4.9% over the next six months. This is down from 5.3% recorded last month. “The regional inflation yardstick has moved into a range indicating elevated inflationary pressures and points to price growth above the Fed’s target for the second half of 2024,” said Goss. 

Confidence: Looking ahead six months, economic optimism as captured by the May Business Confidence Index increased slightly to 33.2 from April’s 32.0. “Approximately 42% of supply managers expect worsening business conditions over the next six months. However, this is a slight improvement from April’s 45% of supply managers expecting slowing economic growth,” said Goss.

Inventories: The regional inventory index, reflecting levels of raw materials and supplies, dipped to 55.6 from April’s 56.3. Said Goss, “At this time, it cannot be determined if the buildup in inventories over the last several months is due to higher expected future sales or a slowdown in current sales.”

Trade: The rising value of the U.S. dollar, making U.S. goods less competitively priced abroad, is hurting exports. As a result, export numbers worsened for the month with new export orders rising to a weak 46.7 from 42.9 in April. Despite the stronger U.S. dollar, the slowing regional economy pulled the import reading down to 41.2 from 47.4 in April. 

Other survey components of the May Business Conditions Index were: new orders plummeted to 47.9 from 58.4 in April; the production or sales index slumped to 43.7 from 52.0 in April; and the speed of deliveries of raw materials and supplies dropped to 50.1 from April’s 56.0. 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 Business Conditions Index fell to 52.5 from 53.2 in April. Components from the May survey of supply managers were: new orders at 48.0; production or sales at 42.3; delivery lead time at 53.1; inventories at 68.7; and employment at 50.2. According to the latest U.S. Bureau of Labor Statistics employment data, the state’s manufacturing sector, over the past 12 months, experienced job losses of 0.9% and hourly wage gains of 6.9%.    

Iowa: The state’s Business Conditions Index for May declined to 53.5 from 55.3 in April. Components of the overall May index were: new orders at 48.1; production or sales at 42.4; delivery lead time at 53.5; employment at 52.4; and inventories at 70.9. According to the latest U.S. Bureau of Labor Statistics employment data, the state’s manufacturing sector, over the past 12 months, experienced job gains of 1.1% and hourly wage gains of 2.2%.    

Kansas: The Kansas Business Conditions Index for May dipped to 51.0 from April’s 51.5.  Components of the leading economic indicator from the monthly survey of supply managers for May were: new orders at 47.9; production or sales at 42.2; delivery lead time at 52.5; employment at 47.0; and inventories at 65.4. According to the latest U.S. Bureau of Labor Statistics employment data, the state’s manufacturing sector, over the past 12 months, experienced job gains of 0.5% and hourly wage gains of 2.2%.    

Minnesota: The May Business Conditions Index for Minnesota sank to 46.3 from 52.4 in April. Components of the overall May index were: new orders at 41.8; production or sales at 47.5; delivery lead time at 50.6; inventories at 54.9; and employment at 36.7. According to the latest U.S. Bureau of Labor Statistics employment data, the state’s manufacturing sector, over the past 12 months, experienced job losses of 0.6% and hourly wage gains of 3.8%.    

Missouri: The state’s May Business Conditions Index slipped to a solid and regional high of 55.2 from 55.5 in April. Components of the overall index from the survey of supply managers for May were: new orders at 48.3; production or sales at 42.6; delivery lead time at 54.3; inventories at 74.8; and employment at 56.3. According to the latest U.S. Bureau of Labor Statistics employment data, the state’s manufacturing sector, over the past 12 months, experienced job gains of 0.8% and hourly wage gains of 10.0%, or tops in the region.    

Nebraska: After rising above growth neutral in April, Nebraska’s overall index fell below the growth neutral threshold. The state’s May Business Conditions Index dropped to 45.4 from April’s 50.1.  Components of the index from the monthly survey of supply managers for May were: new orders at 41.7; production or sales at 47.4; delivery lead time at 50.2; inventories at 53.1; and employment at 34.9. According to the latest U.S. Bureau of Labor Statistics employment data, the state’s manufacturing sector, over the past 12 months, experienced job gains of 3.3%, or tops in the region, and hourly wage gains of 1.8%.    

North Dakota: For a third straight month, the state’s overall index fell below growth neutral. The state’s overall, or Business Conditions Index, fell to a regional low of 40.2 from 44.8 in April.  Components of the overall index for May were: new orders at 46.3; production or sales at 40.6; delivery lead time at 45.2; employment at 43.2; and inventories at 28.8. According to the latest U.S. Bureau of Labor Statistics employment data, the state’s manufacturing sector, over the past 12 months, experienced job gains of 2.9% and hourly wage losses of 1.7%, or last in the region.    

Oklahoma: The state’s Business Conditions Index slumped to 48.4 from April’s 54.7. Components of the overall May index were: new orders at 47.7; production or sales at 42.0; delivery lead time at 51.5; inventories at 59.7; and employment at 41.4. According to the latest U.S. Bureau of Labor Statistics employment data, the state’s manufacturing sector, over the past 12 months, experienced job gains of 0.4% and hourly wage gains of 4.8%.    

South Dakota: The May Business Conditions Index for South Dakota plummeted to 43.2 from April’s regional high of 61.4. Components of the overall index were: new orders at 46.7; production or sales at 41.0; delivery lead time at 47.0; inventories at 35.4; and employment at 35.4. According to the latest U.S. Bureau of Labor Statistics employment data, the state’s manufacturing sector, over the past 12 months, experienced job losses of 1.3%, or last in the region, and hourly wage gains of 3.2%.    

Survey results for the month of June will be released on July 1, 2024, the first business day of the month.

Ernie Goss’ monthly interview