From Creighton University, January 2:
Mid-America December Index Expands:
Labor Shortages Slow Employment Growth
December survey highlights:* After declining for three straight months, the Business Conditions Index rose for the month, remaining above growth neutral for the 25th straight month.
* Labor shortages pulled the employment index down to growth neutral, but more importantly, slowed quarter four growth.
* Trade numbers, both exports and imports, fell significantly for the month.
* 2019 profit outlook remains strong.OMAHA, Neb. (Jan. 2, 2019) – The December Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, rose for the first time since August, pointing to positive economic growth for the next three to six months.Overall index: The Business Conditions Index, which ranges between 0 and 100, climbed to 55.2 from November’s 54.1. This is the 25th straight month the index has remained above growth neutral 50.0.“The regional economy continues to expand at a positive pace. However, as in recent months, shortages of skilled workers remain an impediment to even stronger growth. Furthermore, supply managers are reporting negative impacts from tariffs and trade skirmishes,” 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.As reported by one supply manager in the December survey, “Current tariffs and trade restrictions could become more difficult for us in the upcoming months. So far, the main thing is that it is costing us more to buy foreign products.”Employment: The December employment index sank to 50.0 from 57.5 in November.“Overall manufacturing employment growth in the region over the past 12 months has been very healthy at 2.3 percent, compared to a lower 2.2 percent for the U.S,” said Goss. “I expect this gap to close in the months ahead as regional job growth slows faster than national manufacturing job growth Regional job growth for durable goods producers has been approximately four times that of nondurable goods manufacturers over recent months.”Wholesale Prices: The wholesale inflation gauge continues to indicate elevated inflationary pressures. However, lower oil prices softened the December index to 69.5 from November’s 70.0.
...MUCH MOREBoth Creighton’s regional wholesale inflation index and the U.S. inflation gauge are elevated. Tariffs and expanding growth, for example, have boosted steel prices by 19.8 percent over the past 12 months. At the consumer level, the consumer price index advanced by 2.2 percent over the past 12 months.“I expect lower oil prices and slowing growth to push both wholesale and consumer inflation lower,” Goss said. “I expect the Federal Reserve to announce at their next meeting on Jan. 30 that any additional rate hikes will be data dependent. At the Dec. 19 meeting, the Fed was more locked in on two rate increases for 2019. The Fed is likely to remove that certainty at the January meeting.”Confidence: Looking ahead six months, economic optimism, as captured by the December Business Confidence Index, fell to a still solid 54.1 from November’s 55.5.“However, I expect business confidence to depend heavily on the Fed’s interest rate policies and trade talks with China. Approximately 43.2 percent, of supply managers expect business profits for their company to improve in 2019,” reported Goss.Inventories: Companies contracted inventories of raw materials and supplies for the month. The December inventory index sank to 47.4 from November’s 53.3...