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Mountain States Leading Economic Indicator Dips for July
Business Confidence Tumbles
July survey results at a glance:
· Leading economic indicator dips to a healthy level.
· Inflation gauge declines to a still elevated level as supply managers raise their expectations for the next six months.
· On average, supply managers expect a paltry 1.5 wage gain over the next year.
For Immediate Release: August 1, 2011
Denver, CO – For the 21st 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 national index has risen above growth neutral for 23 consecutive months (www.ism.ws). Both surveys are telling the same story; slow but positive growth in the months ahead.
Overall Index: The overall index, or Business Conditions Index, which ranges between 0 and 100, dipped to 57.4 from June’s 58.4. An index of 50.0 is considered growth neutral. The overall index, or Business Conditions 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.
“Elevated energy prices are a double-edged sword for the Mountain States economy. Energy firms and firms linked to this sector continue to experience healthy growth. On the other hand, higher energy prices are reducing the growth of big users of energy such as manufacturers,” 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 July employment index dipped to 56.2 from 57.6 in June. “This month, we asked supply managers how much of a pay raise they anticipate for the next year. On average supply managers expect an increase of only 1.5 percent for next year. Even though job prospects have improved over the past six months, supply managers see little opportunity for wage growth over the next year,” said Goss.
Wholesale Prices: The prices-paid index, which tracks the cost of raw materials and supplies, declined to a less inflationary 67.8 from June’s 77.1. Supply managers were also asked how much they expected the prices they pay for products and services to increase over the next six months. Approximately 19 percent of respondents anticipate growth of more than 6 percent over the next half year. Overall, an annualized upturn of 7.3 percent is expected. “This is up from an annualized gain of 6.8 percent recorded in November of last year when we asked the same question. Clearly, inflation expectations remain high among supply managers,” said Goss.
Business Confidence: Looking ahead six months, economic optimism, captured by the confidence index, fell to 50.1 from 52.1 in June. “Elevated energy prices, an unhealthy housing market and uncertainty surrounding the U.S. debt situation remain important factors restraining business confidence,” said Goss.
Inventories: Supply managers in the three-state region added to inventories of raw materials and supplies for the month with a reading of 56.2 for July, down from June’s 56.8. “This is the twentieth straight month that we have recorded inventory growth and remains an important growth factor,” said Goss.
Trade: The regional export orders index expanded to 54.2 from June’s growth neutral 50.0. The region’s import reading advanced to 54.2 from June’s 50.0. Supported by a 10 percent decline in the U.S. dollar since February 2010, exports have underpinned regional growth,” reported Goss.
Other Components: Other components of the July Business Conditions Index were new orders at 55.2, down from June’s 63.0; production or sales at 59.9, up slightly from 59.8; and delivery lead time at 59.4, up from 54.5 in June.
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, dipped slightly for July. The overall index, termed the Business Conditions Index, for July declined to a still solid 54.2 from June’s 54.4. Components of the Business Conditions Index for July were new orders at 58.0, production or sales at 51.1, delivery lead time at 51.2, inventories at 43.8, and employment at 67.1. “Driven by solid employment gains and unemployed exiting the work force, Colorado’s unemployment rate has declined by 0.7 percent over the past three months. Based on recent surveys, I expect continuing improvements in the state’s labor market with somewhat slower job growth and a slight improvement in the state unemployment rate,” said Goss.
Utah: The state’s overall index, or Business Conditions Index, a leading economic indicator, once again remained above growth neutral 50.0. Based on the monthly survey of the membership of NAPM-Utah (www.napmutah.org), the overall index advanced to 57.4 from 55.0 in June. Components of the Business Conditions Index for July were new orders at 49.4, production or sales at 58.9, delivery lead time at 58.0, inventories at 57.3, and employment at 53.3. “Driven by solid employment gains and unemployed workers exiting the work force, Utah’s unemployment rate has declined by 0.2 percent over the past three months. Based on recent surveys, I expect continuing improvements in the state’s labor market with upturns in the rate of hiring and a slight improvement in the state unemployment rate," said Goss.
Wyoming: The state’s leading economic indicator from a survey of supply managers in the state climbed above growth neutral for the 21st straight month. The index, termed the Business Conditions Index, declined to 70.6 from 76.3 in June. Supported by NAPM-Western Wyoming (http://www.ism.ws/sites/westwyoming/index.htm), surveys over the past several months point to an expanding state economy for the second half of 2011. Components of the overall index for July were new orders at 81.6, production or sales at 72.0, delivery lead time at 60.9, inventories at 62.5, and employment at 76.1. “Driven by solid employment gains, Wyoming’s unemployment rate has declined by 0.3 percent over the past three months. Based on recent surveys, I expect continuing improvements in the state’s labor market with upturns in the rate of hiring and a slight improvement in the state unemployment rate,” said Goss.
August survey results will be released on September 1.