Dr. Ernie Goss is a regular guest the first Wednesday of each month on The Morning Zone Program. He discusses the details of his regional survey, like this one to keep you well informed.

November 7, 2012

October survey results at a glance by Ernie Goss:

·         Leading economic indicator expands to healthy level and well above national reading.

·         Inflation gauge indicates rising inflationary pressures.

·         Supply managers expect 2013 holiday sales to expand by only 2.6 percent from 2012 sales.

·         Approximately 43 percent of supply managers think a 2013 recession is likely.

Denver, CO – For the 36th 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.  After moving below growth neutral for June, July and August, the national PMI rose above 50.0 for September (www.ism.ws).

Overall Index:  The overall index, or Business Conditions Index, which ranges between 0 and 100, advanced to a healthy 58.6, but down from September’s 61.0.  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.

“Improvements in the housing sector and expansions linked to energy pushed the index into a healthy range for October.  Even so, the gains from energy for October were not as significant as in previous months.  The region continues to grow at a pace significantly above that of the U.S. with the October index for the nation coming in at 51.7,” 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 once again climbed above growth neutral.  The hiring gauge slipped to a still healthy 57.6 from 58.0 in September.  “Over the last three months, employment growth in the region has remained healthy but weakened slightly.  Annualized job growth for the next 3 to 6 months will be above one percent but below pre-recession advances of more than two percent,” said Goss.

Wholesale Prices: The prices-paid index, which tracks the cost of raw materials and supplies, rose to 71.8 from September’s 71.1.  “The Federal Reserve’s latest stimulus, quantitative easing 3 (QE3), and regional drought conditions are pushing the wholesale price gauge well above acceptable levels. I expect this to show up in higher consumer prices in the months ahead. This will limit the Fed’s options regarding further monetary easing.

Business Confidence: Looking ahead six months, economic optimism, as captured by the business confidence index, climbed to 56.0 from September’s 49.5.  “Improvements in the housing sector and strong growth among energy linked firms pushed the confidence index higher for the month,” said Goss.

This month supply managers were asked to gauge the likelihood of a 2013 recession. Approximately 43 percent think a recession is likely, or very likely for 2013.  Approximately 14 think a 2013 recession is unlikely. The remaining 43 percent think there is a 50-50 chance of a recession next year.

Inventories:  Supply managers in the three-state region added to inventories of raw materials and supplies for the month.  The index slipped to a strong 60.8 from 63.3 in September. “We have recorded inventory growth for 35 straight months.  Healthy inventory growth signals that supply managers expect production expansions in the months ahead and is consistent with economic optimism,” said Goss.

This month supply managers were also asked to estimate the percentage increase in 2013 holiday sales from 2012.  Overall a very low 2.6 percent growth is expected. Approximately, 24 percent expect a gain of more than 4 percent. On the other hand, almost 14 percent expect a decrease in 2013 holiday sales over their 2012 levels. “To be considered healthy, holiday sales should grow in excess of 5 percent from previous year sales,” said Goss.

Trade:  The new export order reading for the Mountain States region increased to a solid 58.3 from September’s 56.6, while October imports climbed to 58.7 from 57.3 in September. “We are seeing some benefits of the Fed’s weak dollar policy which has made U.S. and regional goods more competitively priced abroad.  At the same time, regional growth continues to encourage greater imports,” said Goss.

Other Components: Other components used to calculate the overall index for October were new orders at 55.9, down from 61.7 in September; production or sales at 66.5, off from September’s higher 68.1; and delivery lead time at 52.0, down from September’s 54.0.

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 above growth neutral for October.  The overall index, termed the Business Conditions Index, for October advanced to 56.7 from September’s 53.3.  Components of the Business Conditions Index for October were new orders at 51.1, production or sales at 54.0, delivery lead time at 50.1, inventories at 52.1, and employment at 75.9.  “Non-durable goods producers are experiencing expanding business activity while durable goods manufacturers reported somewhat slower growth.  Telecommunication firms in the state continue to reduce employment in the state,” 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 October slipped to 60.1 from September’s 61.7.  Components of the Business Conditions Index for October were new orders at 56.4, production or sales at 69.8, delivery lead time at 54.4, inventories at 63.2, and employment at 56.6.  “Gains continued at a healthy pace for durable goods producer.  However, growth for non-durable goods manufacturers slowed for the month,” 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 36 straight months.  The index, termed the Business Conditions Index, declined to a solid 57.6 from September’s 64.0.  Supported by NAPM-Western Wyoming (http://www.ism.ws/sites/westwyoming/index.htm), surveys over the past several months point to positive but slowing economic growth in the state economy for the next 3 to 6 months.  Components of the overall index for October were new orders at 56.6, production or sales at 59.0, delivery lead time at 53.3, inventories at 60.6, and employment at 58.6.  “Both durable and non-durable goods manufacturing firms experienced little growth for October.  On the other hand, mining and energy firms reported upturns in business activity,” said Goss.

November results will be released on December 3, the first business day in December.

For historical data and forecasts, visit our website at:

www.ernestgoss.com  or