Focus on The Economy in Today’s Morning Zone

Ernie Goss, Economist at Creighton University and The Goss Institute will be our guest today at 7:37AM MDT in The Morning Zone to discuss the latest Mountain States Economic Report.

August Mountain States Leading Economic Indicator Dips to Healthy Level:

Business Confidence Tumbles to Recession Levels

August survey results at a glance: 

· Leading economic indicator dips to a healthy level. 

· Employment gauge is consistent with annualized job growth above a healthy two percent.

· For  the remainder of 2011, approximately 14.3 percent expect a decline in  business activity, 33.4 percent anticipate an upturn in sales, and the  remaining 52.3 percent expect no change in business activity.

· Business confidence slumped below growth neutral. 

For Immediate Release: September 1, 2011 

Denver,  CO – For the 22nd 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 24 consecutive months (www.ism.ws).  The  gap between the results of the two surveys has widened, primarily as a  result of Mountain States’ growth tied to the region’s large energy  sector. 

Overall Index: The overall index, or Business Conditions Index, which ranges between 0 and 100, slipped to 56.8 from 57.4 in July.  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. 

“While  growth is likely to slow slightly due to the slowing of the U.S.  economy, our survey results indicate that a strong energy sector and a  stabilizing housing market are positively influencing the regional  economy,” 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). 

“This month we asked supply managers what the expected sales growth was for their company for the rest of 2011.  Approximately  14.3 percent expect a decline in business activity, 33.4 percent  anticipate an upturn in sales, and the remaining 52.3 percent expect no  change in business activity for the rest of 2011,” reported Goss. 

 Employment: The August employment index advanced to 57.6 from July’s 56.2.  “Contrary to the nation, the Mountain States region is growing its employment at a solid pace.  However, I do expect this pace to slow as the national slowdown begins to reduce regional growth.  Readings over the past several months are consistent with annual job growth above a healthy two percent,” said Goss.

Wholesale Prices: The prices-paid index, which tracks the cost of raw materials and supplies, expanded to an inflationary 76.0 from 67.8 in July.  “Solid economic growth has generated inflationary pressures.  Both  regionally and nationally, inflationary pressures at the wholesale  level remain too high to ignore the likelihood of excessive inflationary  pressures at the consumer level.  With the current Federal  Reserve policy remaining very stimulative, I expect inflation to climb  significantly above the Fed’s target,” said Goss. 

Business Confidence: Looking ahead six months, economic optimism, captured by the confidence index, slumped to 44.5 from 50.1 in July.  “The  uncertainty surrounding federal government and Federal Reserve actions  have dampened the economic outlook of supply managers in the region.  Our confidence index has now moved to levels experienced during the last recession.” 

“This month survey participants were asked to recommend policy actions by the federal government to encourage growth.  Approximately 33 percent recommended cutting spending and 30 percent endorsed reducing regulatory burdens.  No other federal government action garnered more than single digit support from the supply managers,” 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 55.5 but down  from July’s 56.2.  “This is the 21st straight month that we have recorded inventory growth, and it remains an important growth factor,” said Goss. 

Trade:  The regional export orders index expanded to a healthy 57.2 from July’s 54.2.  The region’s import reading advanced to 56.7 from 54.2 in July.  The weak U.S. dollar making U.S. products more competitively priced abroad continues to support exports.  On the other hand, regional growth boosted imports for the month,” reported Goss. 

Other Components: Other components of the August Business Conditions Index were new  orders at 60.6, up from July’s 55.2; production or sales at 58.9, down  from 59.9; and delivery lead time at 51.3, down from 59.4 in July. 

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 August.  The overall index, termed the Business Conditions Index, for August declined to 53.8 from 54.2 in July.  Components  of the Business Conditions Index for August were new orders at 54.0,  production or sales at 50.6, delivery lead time at 50.1, inventories at  45.9, and employment at 68.5.  “Energy extraction firms have added significantly to their workforce, gaining back the jobs lost to the recession.  Durable  goods manufacturers in the state benefiting from exports continue to  expand in the state, adding jobs for new workers and increases in work  hours for current employees,” 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 dipped to a healthy 55.6 from July’s 57.4.  Components  of the Business Conditions Index for August were new orders at 52.3,  production or sales at 58.3, delivery lead time at 54.0, inventories at  57.8, and employment at 55.4.  “Durable and non-durable goods manufacturing firms in the state continue to experience healthy growth and growth prospects.  This has spilled over to firms linked to manufacturing like whole trade firms and transportation companies.  Economic signals remain positive for growth for the rest of 2011," said Goss.

 Wyoming: The  state’s leading economic indicator from a survey of supply managers in  the state climbed above growth neutral for the 22nd straight month.  The index, termed the Business Conditions Index, declined to a strong 60.7 from 70.6 in July.  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 remainder of 2011.  Components  of the overall index for August were new orders at 74.1, production or  sales at 61.0, delivery lead time at 55.4, inventories at 56.3, and  employment at 56.8.  “Non-durable manufacturing firms are experiencing solid growth in the state.  Furthermore, energy and energy related firms have expanded their hiring and added to the hours worked for current employees.  This has fueled overall state growth,,” said Goss.