Mountain States Economic Report
~~By Dr. Ernie Goss~~
Mountain States Indicator Climbs for March:
Economic Outlook Improves as Inflation Cools
March survey results at a glance:
· Very healthy growth among manufacturers more than offset weaker conditions for energy linked firms.
· Almost three-fourths of firms indicated that federal spending sequestration was having no impact on their business activity.
· Inflationary pressures cooled again with prices expected to grow by 2.1 percent for the next year.
For Immediate Release: April 1, 2013
Denver, CO – For the 41st straight month, the overall index for the Mountain States region, a leading economic indicator for the three-state area of Colorado, Utah and Wyoming, advanced above growth neutral 50.0. The March index from the survey of supply managers, as in past months, continues to exceed the national index (www.ism.ws).
Overall Index: The overall index, or Business Conditions Index, which ranges between 0 and 100, climbed to 56.2 from 54.9 in February. An index of 50.0 is considered growth neutral. The overall 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.
“Growth among manufacturing firms in the region more than offset slowing economic conditions among energy firms. Durable goods manufacturers experienced healthy growth in business growth for the month,” Goss Institute for Economic Research Director Dr. Ernie Goss said today.
The Goss Institute conducts the monthly survey for Supply Management Institutes in the three states comprising the Mountain States region. Goss also directs Creighton University’s Economic Forecasting Group and is the Jack A. MacAllister Chair in Regional Economics (http://www.ernestgoss.com/aboutus.html).
Employment: The employment index rose above growth neutral for the month. The hiring gauge climbed to 57.3 from 54.2 in February. “Very healthy growth in construction had a significant and positive impact on hiring for a broad range of industries in the region. Durable goods producers added jobs at a healthy pace for March,” said Goss.
Wholesale Prices: The prices-paid index, which tracks the cost of raw materials and supplies, sank to 67.5 from February’s 71.8 and 69.8 in January.
“This month we asked supply managers how much they expected the prices for their company’s products and services to increase this year in comparison to last year. On average, supply managers expect their prices to grow by 2.1 percent for 2013, or approximately the current rate of growth in the U.S. consumer price index. Thus far, the Federal Reserve’s cheap money policy is elevating inflationary pressures, but only modestly. The bigger problem in the Mountain States has been the Fed’s impact on asset prices such as farm and ranchland which continue to expand at annual rates above 15 percent for much of the region. However, the combination of good growth for the month and cooling inflationary pressure are very positive signals,” said Goss.
Business Confidence: Looking ahead six months, economic optimism, as captured by the business confidence index, expanded to 53.8 from February’s 49.8. “This month we asked supply managers how the federal spending sequestration was affecting their company. Almost three-fourths, or 73.7 percent, indicated that the cuts were having no impact on their company. Another 21.1 percent reported only modest impacts, with the remaining 5.2 percent of businesses reporting significant impacts. Improvements in construction and manufacturing along with cooling inflationary pressures are having a positive impact on supply managers’ economic outlook,” said Goss.
Inventories: Supply managers in the three-state region added to inventories of raw materials and supplies for the month. The index rose to 60.6 from 59.5 in February. “We have recorded inventory growth for 40 straight months. Healthy inventory growth normally signals that supply managers expect production expansions in the months ahead and is consistent with economic growth and expanding business confidence,” said Goss.
Trade: The new export order reading for the Mountain States region increased to 54.2 from February’s 53.3. The import reading for the month expanded to 57.4 from February’s 54.8. “Healthy growth among Mountain States’ firms pushed buying from abroad to March’s healthy level. Firms in the region continue to expand sales abroad even with slowing global economic growth,” said Goss
Other Components: Other components used to calculate the overall index for March were new orders at 54.7, up slightly from February’s 54.1; production or sales at 56.8, up from 53.1 in February; and delivery lead time at 51.6, down from 53.2 in February.
The Institute for Supply Management, formerly the Purchasing Management Association, has been formally surveying its membership since 1931 to gauge business conditions (www.ism.ws). The Goss Institute uses the same methodology as the national survey. 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. The overall index is a mathematical average of new orders, production or sales, employment, inventories and delivery lead time.
The Creighton Economic Forecasting Group has conducted the monthly survey of supply managers in Colorado, Utah, and Wyoming since 1994 to produce leading economic indicators of the Mountain States region. The Goss Institute assumed operation of the survey in August of 2008, working with NAPM-Utah (www.napmutah.org) and NAPM-Western Wyoming (http://www.ism.ws/sites/westwyoming/index.htm).
Colorado: The state’s leading economic indicator, based on a monthly survey of supply managers in the state, moved well above growth neutral for March. The overall index, termed the Business Conditions Index, climbed to 60.8 from February’s healthy 58.9. Components of the Business Conditions Index for March were new orders at 57.3, production or sales at 62.3, delivery lead time at 63.6, inventories at 65.7, and employment at 54.5. “The state’s rapidly expanding construction industry is encouraging expansions for a broad range of industries in the state. Durable goods producers expanded economic activity at a healthy pace for March even as energy related firms experienced slower growth for the month,” said Goss.
Utah: The state’s overall index, or Business Conditions Index, a leading economic indicator, once again moved above growth neutral 50.0. Based on the monthly survey of the membership of ISM-Utah (www.napmutah.org), the overall index for March declined to 53.3 from 54.7 in February. Components of the Business Conditions Index for March were new orders at 46.8, production or sales at 54.7, delivery lead time at 51.6, inventories at 57.8, and employment at 55.5. “Healthy advances for durable goods and non-durable goods manufacturers more than offset slowdowns among energy and energy linked firms. Our survey results over the last several months indicate that the Utah economy will continue to expand in the next 3 to 6 months,” said Goss.
Wyoming: The state’s leading economic indicator from a survey of supply managers in the state has now climbed above growth neutral 50.0 for 41 straight months. The index, termed the Business Conditions Index, declined slightly to a still healthy 58.3 from 59.4 in February. Supported by NAPM-Western Wyoming (http://www.ism.ws/sites/westwyoming/index.htm), surveys over the past several months point to positive economic growth in the state economy for the next 3 to six months. Components of the overall index for March were new orders at 73.9, production or sales at 56.4, delivery lead time at 41.1, inventories at 60.1, and employment at 60.3. “Healthy growth among non-durable firms including foods processors and chemical manufacturers more than offset slowdowns among durable goods producers and energy linked firms in the state,” said Goss.
April results will be released on May 1, the first business day in May.
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