From Creighton University's Heider College of Business, June 1:
May survey highlights:
- Creighton’s regional Business Conditions Index declined into a range indicating solid manufacturing growth.
- Wholesale price gauge escalates indicating excessive inflationary pressures.
- On average, supply managers expect prices for supplies and raw materials to soar by 8.7% over the next six months (17.4% annualized).
- Supply chain disruptions and transportation delays increased for the month.
- More than two-thirds of supply managers expect supply chain disruptions to be the greatest threat for rest of 2022.
- Economic confidence plummets for the month. More than six of ten survey participants expect the economy to worsen in the next 6 months.
OMAHA, Neb. (June 1, 2022) – The Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, rose above growth neutral for the 24th straight month.
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 a still-solid 60.0 from April’s 65.9. The Mid-America report is produced independently of the national ISM.
“Creighton’s monthly survey results indicate the region continues to add manufacturing activity at a solid pace, but with significant, and rising inflationary pressures. Supply chain disruptions remain the greatest challenge for the rest of 2022, according to supply managers,” 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, “We have been anticipating a major, negative economic correction; and we believe the major negative economic correction has started.”
Approximately two-thirds of supply managers expect supply chain disruptions to remain the greatest economic challenge to their business for the remainder of 2022.
“Approximately one of five supply managers indicated higher inflation represented their greatest business challenge. Surprisingly, fewer than 5% named labor shortages as their greatest threat for 2022,” reported Goss.
Employment: Despite healthy growth in monthly economic activity for almost two years, manufacturers in the region have added jobs at only a modest pace. That said, the employment index rose above growth neutral for the fourth straight month, but plummeted to 53.4 in May from 62.1 in April. Except for Arkansas and South Dakota, non-farm employment levels remain below pre-pandemic levels for all states in the region.
Other May comments from supply managers were:
“People need to work as part of their life purpose. Our society has developed generations of people without a purpose since the great society movement — and now that lack of purpose is accelerating.”
“Lack of strong leadership both nationally and inept leadership in my organization are causing considerable issues.”
“Need better energy policy. We are reaping the consequences of printing too much money.”
“Time to vote out government waste.”
Wholesale Prices: The wholesale inflation gauge for the month climbed to 91.7 from April’s 89.7. “Creighton’s monthly survey continues to track the highest and most consistent inflationary pressures at the wholesale level in more than a quarter of a century of conducting the survey. On average, supply managers expect prices for raw materials and supplies to rise by 8.7% in the next six months, or 17.4% annualized,” said Goss.
According to the U.S. Bureau of Labor Statistics, commodity prices are up approximately 21.5% over the last 12 months with farm products advancing by 34.4%, metal products expanding by 24.8% and fuels soaring by 49.0% during this same time period.
“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, June 14-15 and July 26-27, despite the current economic slowdown and the rising probability of a recession,” said Goss....
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