Middle America Business Conditions Index for November (Text)

Following is the text from the Mid- America Business Conditions Survey of supply managers and business leaders in the region from Creighton University.

November survey results at a glance:

Leading economic indicator rises above growth neutral Approximately 30 percent of firms anticipate adding new employees in the first half of 2012 Employment gauge falls below growth neutral for the fourth straight month Supply managers expect wholesale prices to rise by 3.7 percent over the next six months Anticipated annualized wholesale-price growth has declined by 1.5 percentage points since February 2010.

After declining below growth neutral in October, the Business Conditions Index for the nine-state, Mid-America region, moved above 50.0 for November. The index, a leading economic indicator from a monthly survey of supply managers, continues to point to slow growth for the region for the next three to six months and a small risk of a recession.

Overall Index:

The index, which ranges between 0 and 100, climbed to 52.6 from 49.9 for October. November’s reading is the 23rd time in the past 24 months that the index rose above growth neutral. “Surveys over the past several months indicate that the slowdowns in the national and global economies are putting downward pressure on the regional economy,” said Ernie Goss, director of Creighton’s Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics.

The overall index, or 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 by the National Institute for Supply Management.

Employment:

For a fourth straight month, the employment index remained below growth neutral, though the November reading inched higher to 49.5 from October’s 49.0.“Our surveys over the last four months indicate that job growth in the region has slowed significantly. Approximately 18 percent of survey companies reported net job reductions for November, the same as in October,” said Goss.

This month firms, were asked about their hiring expectations for the next six months. “Only 30 percent expect to add workers while the remaining 70 percent anticipate layoffs or level employment for the first half of 2012,” said Goss. “These expectations are somewhat more optimistic than December 2010, when 24 percent anticipated worker additions for the next six months.”

Wholesale Prices:

The prices-paid index, which tracks the cost of raw materials and supplies, rose to 60.9 from October’s 56.0. As regional growth has waned, so have inflationary pressures at the wholesale level. “Lower inflation in the pipeline gave the Federal Reserve room to take the coordinated monetary easing action it initiated yesterday with five other central banks,” said Goss.

This month supply managers were asked how much they expected prices of products they buy to increase in the next six months. Approximately 20 percent of the supply managers expect these prices to grow by more than 6 percent during the next six months. Overall, supply mangers anticipate prices to grow by 3.7 percent over the next six months or approximately 7.4 percent on an annualized basis. “Last February when we asked the same question, supply managers expected annualized price growth of 8.8 percent. Thus, anticipated wholesale price growth has declined by 1.5 percentage points since February,” said Goss.

Inventories:

After declining below growth neutral for October, supply managers in the nine-state region once again increased inventory levels for the month. November’s inventory index climbed to 52.9 from October’s 48.5.

Confidence:

Looking ahead six months, economic optimism, as captured by the November business confidence index, sank to 49.1 from October’s already weak 49.5. “Supply managers in our survey remain pessimistic about economic prospects for the first half of 2012. Economic uncertainty in Europe and a frail U.S. housing sector were identified as factors weighing on the economic outlook,” said Goss.

Trade:

Tepid regional growth has pushed Mid-America firms to pull back on their purchases from abroad. The November import index once again sank below growth neutral with a reading of 49.5, up slightly from October’s 48.0. “Even with an upturn in new export orders to 52.1 from October’s 50.0, weak global economic growth continues to restrain exports for firms in the region,” said Goss.

Other Components:

Other components of the November Business Conditions Index were new orders at 52.0, up from October’s 45.4; production or sales at 52.4, up from 48.5; and delivery lead time at 56.5, down from 57.9 in October.

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 Creighton Economic Forecasting Group uses the same methodology as a national survey by the Institute for Supply Management, formerly the Purchasing Management Association, which has formally surveyed its membership since 1931 to gauge business conditions. The 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.

SOURCE: Mid-America Business Conditions Survey, http:/www.outlook-economic.com

To contact the reporter on this story: Chris Middleton in Washington at cmiddleton2@bloomberg.net

To contact the editor responsible for this story: Marco Babic at mbabic@bloomberg.net

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