Goss Says Mountain States Leading Economic Indicator Advances[Audio]
By Ernie Goss
(Goss will be our featured guest Wednesday at 7:37AM MDT in The Morning Zone)
For Immediate Release: October 3, 2011
Denver, CO – For the 23rd 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 25 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 and to exports.
Overall Index: The overall index, or Business Conditions Index, which ranges between 0 and 100, advanced to 57.8 from 56.8 in August. 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.
“National data indicate that the U.S. economy is teetering on an economic recession. On the other hand, the Mountain States region continues to expand with little evidence of an impending recession. Businesses with close ties to agriculture and energy continue to expand and add jobs at a healthy pace,” 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 September employment index slipped to a still healthy 56.4 from August’s 57.6 and July’s 56.2. “While job growth in the U.S. has been virtually nil over the past several months, firms in the Mountain States region continue to add jobs at a healthy pace according to our surveys,” said Goss.
“This month we asked supply managers about expected layoffs in the next six months. Approximately 28 percent of survey participants expect layoffs in the months ahead with 72 percent anticipating flat or positive growth. In December 2010, when we asked this same question, only 7 percent anticipated layoffs. Clearly the job outlook has deteriorated even in this part of the country,” reported Goss.
Wholesale Prices: The prices-paid index, which tracks the cost of raw materials and supplies, dipped to an inflationary 71.2 from 76.0 in August. “I expect recent strength in the U.S. dollar, a slowing national economy and European economic problems to result in declining inflationary pressures in the months ahead. However, with the current Federal Reserve policy remaining very stimulative, I expect inflation to climb above the Fed’s historical target,” said Goss. As one supply manager reported, “Sales are flat but the cost of inputs continues to rise.”
Asked about future price increases, supply managers anticipate growing at an annualized 4.0 percent pace in the next six months. Likewise, supply managers expect an average pay increase of 1.8 percent over the next year.
Business Confidence: Looking ahead six months, economic optimism, captured by the confidence index, slumped to 42.0 from 44.5 in August and 50.1 in July. “It is clear that the economic uncertainty engulfing Europe and the U.S. have dampened the economic outlook of supply managers in the region. Even though the regional economy continues to grow, supply managers remain concerned about the likely impact of a U.S. recession,” 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 57.3, up from 55.5 in August. “This is the 22nd 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 very healthy 73.4 from August’s 57.2. The region’s import reading dipped to 56.3 from August’s 56.7. “Given a somewhat stronger U.S. dollar, making U.S. goods less competitively priced abroad, it was surprising to record such a strong export reading,” reported Goss.
Other Components: Other components of the September Business Conditions Index were new orders at 60.5, down slightly from 60.6 in August; production or sales at 60.7, up from 58.9; and delivery lead time at 56.7, up from 51.3 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, dipped slightly for September. The overall index, termed the Business Conditions Index, for September declined to 51.9 from 53.8 in August. Components of the Business Conditions Index for September were new orders at 52.0, production or sales at 55.3, delivery lead time at 50.0, inventories at 45.4, and employment at 56.8. “Manufacturing employment has expanded at a solid pace over the past year. Likewise, firms have increased the hours worked for current employees. Our surveys point to continued economic expansion in the state for the rest of 2011,” 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 ISM-Utah (www.napmutah.org), the overall index dipped to a still healthy 55.4 from 55.6 in August. Components of the Business Conditions Index for September were new orders at 54.1, production or sales at 60.0, delivery lead time at 56.1, inventories at 55.6, and employment at 51.3. “Construction tied to energy and manufacturing has been an important component of growth. Contrary to Colorado manufacturers, Utah producers have not increased the hours works of current employees but have instead relied on adding new employees,” said Goss.
Wyoming: The state’s leading economic indicator from a survey of supply managers in the state climbed above growth neutral for the 23rd straight month. The index, termed the Business Conditions Index, advanced to 66.8 from 60.7 in August. 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 September were new orders at 77.1, production or sales at 65.5, delivery lead time at 67.7, inventories at 68.1, and employment at 55.4. “Firms supporting the energy sector and companies continue to report very strong growth in the state. The average hourly work week continues to expand. There is no evidence, at this time, of any pullback in economic activity in 2011,” said Goss.
October survey results will be released on November 1.