Mountain States Economic Report-Professor Ernie Goss

 Institute for Economic Research Director Dr. Ernie Goss publishes the Mountain Stats Economic Report monthly, and will be our guest Wednesday, December 5, at 7:37AM MST on The Morning Zone to discuss it in detail.  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

Mountain States’ Leading Economic Indicator Slips:

Economic Confidence Sinks

November survey results at a glance:

·        Leading economic indicator dips to healthy level remaining well above national index.

·        Approximately 30 percent of supply managers expect no pay raise next year. 

·        On average, supply managers project a 1.6 percent wage gain for the next year.

·        New export orders remain very healthy.

·        Business confidence index plummets.

  For Immediate Release: December 3, 2012

Denver, CO – For the 37th 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 for November, and it continues to exceed the national index which declined below growth neutral for June, July and August and moved slightly above growth neutral for September and October (www.ism.ws).      

Overall Index:  The overall index, or Business Conditions Index, which ranges between 0 and 100, fell to a still solid 55.9, down from 58.6 in October and 61.0 in September.  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. 

“The region has grown at a pace exceeding that of the nation.  Our regional survey results over the past several months, compared to national surveys, indicate that the regional economy will continue to outperform the national economy.  Even so, regional growth over the next 3 to 6 months will slow, but remain positive.

Employment: The employment index once again climbed above growth neutral.  The hiring gauge fell to a softer 52.1 from October’s healthier 57.6.  “For 2012, the regional economy has added jobs at its healthy pre-recession rate.  Surveys indicate that business growth will slow, with job growth declining but remaining positive over the next 3 to 6 months.  However even with healthy job growth for 2012, approximately 30 percent of supply managers expect no pay raise next year.  On average, supply managers project a 1.6 percent wage gain for the next year,” said Goss.

 Wholesale Prices: The prices-paid index, which tracks the cost of raw materials and supplies, dipped to 69.7 from October’s 71.8.  “Weaker commodity prices, such as those for oil and copper, linked to slower global growth are showing up in our survey.  However, I expect the Federal Reserve’s easy money policy to continue to support elevated commodity prices even with the global economic slowdown,” said Goss. 

This month supply managers were asked how much they expect prices for products they purchase to change in the next six months.  On average, a 2.9 percent increase is expected.  This compares to a projected 2.2 percent increase recorded in May of this year.  “Thus, supply managers have raised their annualized projected wholesale price growth for supplies they purchase from 4.4 percent to 5.8 percent since May,” said Goss.

Business Confidence: Looking ahead six months, economic optimism, as captured by the business confidence index, plummeted to 48.9 from 56.0 in October.  “Both the fiscal cliff and the uncertainty surrounding healthcare reform were reported by supply managers as negatively affecting their economic outlook,” said Goss.

Inventories:  Supply managers in the three-state region added to inventories of raw materials and supplies for the month.  The index advanced to 62.4 from October’s strong 60.8.  “We have recorded inventory growth for 36 straight months.  Healthy inventory growth normally signals that supply managers expect production expansions in the months ahead and is consistent with economic growth,” said Goss. 

Trade:  The new export order reading for the Mountain States region slipped to a healthy 57.1 from October’s 58.3 while November imports climbed to 63.2 from 58.7 in October.  “The weakening global economy has yet to restrain regional exports.  At the same time, the expanding regional economy has pushed international purchases by Mountain States’ firms higher,” said Goss.    

Other Components: Other components used to calculate the overall index for November were new orders at 53.9, down from 55.9 in October; production or sales at 60.2, off from October’s higher 66.5; and delivery lead time at 51.0, down from 52.0 in October.   

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 November.  The overall index, termed the Business Conditions Index, for November dipped to 54.9 from 56.7 in October.  Components of the Business Conditions Index for November were new orders at 42.2, production or sales at 51.5, delivery lead time at 50.1, inventories at 59.4, and employment at 71.3.  “Expanding business growth was reported across a broad range of industries in the state including mining, durable goods manufacturing, and non-durable goods manufacturing.  Furthermore, an advancing construction industry is having positive impacts on firms linked to this industry,” 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 November slipped to 57.3 from October’s 60.1.  Components of the Business Conditions Index for November were new orders at 57.1, production or sales at 65.2, delivery lead time at 52.2, inventories at 62.2, and employment at 49.9.  “Manufacturers in the state, especially durable goods producers such as computer and electronic component manufacturers and metal producers, continue to experience expanding economic conditions.  Survey results point to solid but somewhat slower growth in the next 3 to 6 months,” 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 37 straight months.  The index, termed the Business Conditions Index, declined to a solid 55.9 from October’s 57.6.  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 November were new orders at 53.3, production or sales at 54.5, delivery lead time at 51.7, inventories at 63.6, and employment at 53.2.  “Mining firms, and firms tied to mining, are experiencing positive but slowing growth in the state.  Survey of supply managers in the state over recent months point to even slower growth over the next 3 to 6 months,” said Goss. 

December results will be released on January 2, the first business day in January.