From Creighton's Heider College of Business, August 2:
July survey highlights:
- Creighton’s regional Business Conditions Index climbed into a range indicating very strong growth for the next three to six months.
- Confidence index plummets to lowest level in five months.
- The wholesale inflation gauge surged to another record high.
- More than half of supply managers expect soaring input prices to be pushed off on to their customers.
- Almost 38% of supply managers expect rocketing input prices to be absorbed by their company in the form of lower profits.
- On average, supply managers expect price for their companies’ prices to advance by another 7.7%, over the next 12 months.
OMAHA, Neb. (Aug. 2, 2021) – Since declining to a record low in April of last year, the Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, moved above growth neutral for 14 of the last 15 months.
Overall index: The Business Conditions Index, which uses the identical methodology as the national ISM, ranges between 0 and 100, dipped to a still strong 73.1 from June’s 73.5. However, as in previous months, between 80% and 90% of manufacturing supply managers report that labor shortages and supply bottlenecks continue to restrain growth.
“Creighton’s monthly survey results indicate the region is adding manufacturing business activity at a very healthy pace, and that regional growth will remain strong. Absent supply bottlenecks and labor shortages, that growth would be even stronger,” 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.
Employment: The regional employment index remained above growth neutral for July rising to 67.2, its highest level in more than two decades, from 61.7 in June. “Even with strong manufacturing job growth, the region has yet to recover all job losses from the pandemic. The latest U.S. Bureau of Labor Statistics data indicate that current regional nonfarm employment is down by 540,000 jobs, or 3.9%, compared to pre-Covid-19 levels,” said Goss.
Even with healthy job growth for the month, firms continue to report difficulties in finding and hiring new workers. As stated by one supply manager, “Despite hiring incentives it is very difficult to attract anyone, we are turning business away due to capacity limitations.”
Wholesale Prices: The wholesale inflation gauge for the month surged to a record high 98.7 from June’s 98.4, the previous record high.
“At the wholesale level, Creighton’s survey is tracking higher and higher inflationary pressures. Commodity prices are up approximately 19.5% over the last 12 months according to U.S. Bureau of Labor Statistics data. Supply managers in Creighton’s June survey expect prices for their firm’s products to advance by 7.7% for the next 12 months,” said Goss.
As stated by one survey manager, “Price increases are rampant. Air filters have had three price increases in the last year. Delivery is taking 30-60 days.”
In terms of the burden of soaring input prices, 58.6% of supply managers expect the gain to be borne primarily by their customers while 37.9% expect company profits to absorb most of the hit, and only 3.5% anticipate that the increase will result in lower wages for workers.
Confidence: Looking ahead six months, economic optimism, as captured by the July Business Confidence Index, slumped to 53.6 from June’s 60.8 and May’s very strong 88.6.....
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