Ernie Goss-September Mountain States Economy
~~By Ernie Goss Ph.D. ~~
Mountain States Job Index Sinks for September:
Affordable Care Act Having Large Negative Impacts
September survey results at a glance:
· Regional index declines to a weak but positive reading.
· Employment index slumps below growth neutral.
· Approximately 26.3 percent of businesses report negative employment impacts from the Affordable Care Act (ACA).
· Approximately one-half of firms report no impact from federal spending sequestration.
· Business confidence plunges.
Denver, CO – Much like the national ISM results that came out this morning (www.ism.ws), the overall index for the Mountain States region for September, a leading economic indicator for the three-state area of Colorado, Utah and Wyoming, stood at a level pointing to positive but slow growth for the next 3 to 6 months.
Overall Index: The overall index, or Business Conditions Index, which ranges between 0 and 100, declined to 51.0 from 53.6 in August. 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.
“Even though growth will continue for the remainder of 2013, it will be at a slower pace. Mining firms and companies supporting this sector are experiencing pullbacks in economic activity. On the other hand, construction activity, especially in Colorado, continues to trend higher and add to overall regional growth. Of course, the federal government shutdown, if lengthy, will jeopardize even this modest growth,” 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 monthly hiring gauge took a big fall for the month. The index sank to 48.3 from 54.1 in August. “Manufacturers linked to agriculture and energy are growing at a slower pace than this time last year. On the other hand, companies tied to construction are experiencing healthy growth. Food processing firms are also expanding at a solid pace,” said Goss.
This month supply managers were asked how the Affordable Care Act (ACA) was affecting hiring in their company. More than one-fourth, or 26.4 percent, reported that the ACA had either resulted in a reluctance to hire, reduced hiring, additional layoffs or a reduction in hours worked. Approximately 73.7 percent of firms reported no hiring or staffing impacts for their firm.
Wholesale Prices: The prices-paid index, which tracks the cost of raw materials and supplies, climbed to 61.5 from 59.2 in August. “The last two months, we have recorded fairly sizable jumps in our inflation gauge. Given that the Federal Reserve continues their $85 billion monthly bond buying stimulus program, the risk of elevated inflation is climbing but still remains well below levels that should cause concern,” said Goss.
Business Confidence: Looking ahead six months, economic optimism, as captured by the business confidence index, plummeted to 42.2 from August’s 49.4. “Uncertainty surrounding implementation of health care reform and the Congressional/Presidential budget impasse pushed supply managers’ economic outlook lower for the month,” said Goss.
The federal spending sequestration is having very little impact on the outlook. “The last seven months, we have asked supply managers how the federal spending sequestration was affecting their company. In the September survey, more than half - or 51.0 percent - of supply managers indicated that the cuts have had an impact on their company to date. Another 45 percent reported that the impacts have been modest while the remaining 4 percent detailed significant impact. The negative impacts according to supply managers are rising,” said Goss.
Inventories: The index rose to 52.3 from 49.4 in August. “Healthy inventory growth normally signals that supply managers expect production and/or sales advances in the months ahead and is consistent with economic growth albeit slow,” said Goss.
Trade: The new export order reading for the Mountain States region decreased to 42.2 from August’s 50.9. The import reading for the month declined to a weaker 47.1 from 49.2 in August. “As in previous months, slower global economic growth, along with increases in the value of the U.S. dollar, is having clear negative impacts on sales abroad. The tepid import reading is another signal that firms, as a result of slow growth, are not buying vigorously from abroad,” said Goss
Other Components: Other components used to calculate the overall index for September were new orders at 47.6, down from last month’s 53.5; production or sales at 45.9, down from 52.9 in August; and delivery lead time at 60.9, up from August’s 57.9.
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 ISM-Utah (www.ismutah.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, rose above growth neutral for September. The overall index, termed the Business Conditions Index, sank to 52.2 from 56.5 in August. Components of the Business Conditions Index for September were new orders at 50.0, production or sales at 44.1, delivery lead time at 66.0, inventories at 46.7, and employment at 54.4. “Construction activity, commercial, residential and industrial, continues to be an important driver of overall state growth, even with higher long term interest rates. The state is adding jobs at an annual pace exceeding 2.0 percent, or more than double the pace of the nation. Non-durable goods producers are adding jobs even as durable goods manufacturers reduce jobs,” 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.ismutah.org), the overall index for September expanded to a tepid 52.2 from 51.9 in August. Components of the Business Conditions Index for September were new orders at 46.1, production or sales at 46.8, delivery lead time at 57.6, inventories at 52.1, and employment at 48.5. “Weakness among mining firms and firms linked to mining more than offset strength among durable and non-durable manufacturing firms in the state," 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 47 straight months. The index, termed the Business Conditions Index, rose to 54.8 from 54.5 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 three to six months. Components of the overall index for September were new orders at 66.3, production or sales at 63.9, delivery lead time at 51.5, inventories at 45.3, and employment at 46.7. “As in previous months mining and firms supporting mining in Wyoming are reducing jobs and hours. This pullback is being offset by expansions among manufacturing firms in the state as they expand output via higher productivity rather than significant new hiring,” 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: