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Ernie Goss: Mountain States’ Leading Economic Indicator Advances:

Ernie Goss

(Be listening to today’s Morning Zone Program with Dave Chaffin as his guest will be Economist Ernie Goss, author of this report).
New Export Orders Big Contributor

September survey results at a glance:

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

·         Inflation gauge indicates rising inflationary pressures.

·         New export orders turn upward adding to regional growth.

·         Economic outlook remains weak.

For Immediate Release: October 1, 2012

Denver, CO – For the 35th 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 above growth neutral for 34 consecutive months, the national PMI slumped below growth neutral for June, July and August (www.ism.ws).

Overall Index:  The overall index, or Business Conditions Index, which ranges between 0 and 100, advanced to a healthy 61.0 from August’s 59.0.  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.

“Energy and exports continue to fuel expansions among the region’s durable and non-durable goods manufacturers.  The growth gap between the Mountain States’ economy and the U.S. economy is widening as the national economy continues to slow,” 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 58.0 from 59.2 in August.  “Over the last three months, employment growth in the region has remained strong while the nation’s job growth has fallen significantly,” said Goss.

Wholesale Prices: The prices-paid index, which tracks the cost of raw materials and supplies, rose to 71.1 from August’s 65.9.  “This month, we asked supply managers by how much they expected prices of products and services they purchase to increase in the next six months.  On average, a 2.8 percent increase, or 5.6 percent annually, is anticipated.  Both current and expected wholesale price gains will likely push consumer price growth well above the Federal Reserve’s comfort zone in my judgment.  The Fed’s September QE3, or quantitative easing, will only add to this inflationary pressure,” said Goss.

Business Confidence: Looking ahead six months, economic optimism, as captured by the business confidence index, climbed to a weak 49.5 from 46.7 in August.  “Supply managers, much like the entire business sector, remain very pessimistic regarding future economic conditions.  The looming fiscal cliff, the elections, and European economic turmoil are all weighing on economic confidence,” said Goss.

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 63.3 from August’s 65.6.  “We have recorded inventory growth for 34 straight months.  Healthy inventory growth signals that supply managers expect production expansions in the months ahead,” said Goss.

Trade:  The new export order reading for the Mountain States region increased to a solid 56.6, up from 48.2 in August, while September imports climbed to 57.3 from August’s 54.6.  “Healthy regional growth bolstered buying from abroad by Mountain States’ firms.  At the same time, manufacturers in the region experienced healthy gains in sales abroad,” said Goss.

Other Components: Other components used to calculate the overall index for September were new orders at 61.7, up from 53.5 in August; production or sales at 68.1, an upturn from 61.1; and delivery lead time at 54.0, down from 55.7 in August.

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 September.  The overall index, termed the Business Conditions Index, for September sank to 53.3 from August’s 59.0.  Components of the Business Conditions Index for September were new orders at 52.2, production or sales at 58.0, delivery lead time at 50.3, inventories at 54.2, and employment at 51.8.  “Durable goods manufacturers, including computer and electronic producers and transportation equipment manufacturers, are experiencing solid upturns in economic activity.  Colorado non-durable is also expanding sales and employment,” 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 September climbed to 61.7 from August’s 60.6.  Components of the Business Conditions Index for September were new orders at 62.7, production or sales at 70.8, delivery lead time at 58.8, inventories at 62.0, and employment at 54.4.  “Manufacturers, both durable and non-durable, in the state are experiencing healthy growth.  Utah firms with ties to energy are expanding and will continue to grow as the Federal Reserve’s cheap money policies push energy commodity prices higher,” 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 35 straight months.  The index, termed the Business Conditions Index, advanced to 64.0 from 54.3 in August.  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 September were new orders at 63.2, production or sales at 67.9, delivery lead time at 56.6, inventories at 71.2, and employment at 61.1.  “While energy related growth in the state has slowed, Wyoming manufacturers are experiencing solid expansions in business activity,” said Goss.

October results will be released on November 1, the first business day in November.

For historical data and forecasts, visit our website at:

www.ernestgoss.com  or

www.outlook-economic.com

www.twitter.com/erniegoss

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