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MOUNTAIN STATES ECONOMIC REPORT

Mountain States Leading Indicator Healthy for April:
 Inflationary Pressures Cool Again

~~ By Economist Ernie Goss~~

April survey results at a glance:

·         Leading economic indicator points to continuing growth for the next 3 to 6 months.
·         More than 70 percent of businesses reported that the federal spending sequestration has had no impact on their business.
·         Inflationary pressures at the wholesale decline again.
·         Approximately 55 percent have experienced, or expect to experience negative impacts from the Affordable Care Act.

For Immediate Release: May 1, 2013

Denver, CO – For the 42nd 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 April index from the survey of supply managers, as in past months, continues to exceed the national index (www.ism.ws) and point to growth significantly exceeding that of the U.S.
Overall Index:  The overall index, or Business Conditions Index, which ranges between 0 and 100, climbed to58.3 from 56.2 in March.  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.
“Companies with close ties to housing and agriculture are benefiting from the rebound in housing and the expansion in the agriculture sector,” 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 employment index rose above growth neutral for the month.  However, the hiring gauge slipped to a healthy 56.2 from March’s 57.3.  “The region is now adding jobs at almost three times the pace of the U.S.  Durable and non-durable manufacturers as well as value added services, such as engineering services, are stepping up their hiring.  Our surveys indicates that this trend will continue for at least the next 3 to 6 months,” said Goss.
Wholesale Prices: The prices-paid index, which tracks the cost of raw materials and supplies, sank to 65.7 from 67.5 in March and February’s 71.8.  “Inflationary pressures at the wholesale level are definitely trending downward.   Thus far, the Federal Reserve’s cheap money policy is elevating inflationary pressures, but only modestly. The bigger problem in the Mountain States region has been the Fed’s impact on asset prices such as farm and ranch land which continue to expand at rates that should concern agriculture interests,” said Goss.
Business Confidence:  Looking ahead six months, economic optimism, as captured by the business confidence index, expanded to 58.2 from March’s 53.8.  “Supply managers expect the upturn in housing to remain an important ingredient of the economic expansion.  The federal spending sequestration is having little impact on the regional economy or the outlook. The last two months, we have asked supply managers how the federal spending sequestration was affecting their company. Approximately 70 percent of supply managers in March and April indicated that the cuts have had no impact on their company to date.  Almost one-fourth reported only modest impacts. Only five percent of the businesses reported significant impacts,” said Goss.
This month we also asked supply managers the expected outcome from the Affordable Care Act.  Approximately 55 percent have experienced, or expect to experience negative impacts. Only five percent anticipate positive impacts, while the remaining 40 percent expect little or no impact on their business.

Inventories:  Supply managers in the three-state region added to inventories of raw materials and supplies for the month.  The index rose to 65.6 from 60.6 in March.  “We have recorded inventory growth for 41 straight months.  Healthy inventory growth normally signals that supply managers expect production expansions in the months ahead and is consistent with economic growth and expanding business confidence,” said Goss.
Trade:  The new export order reading for the Mountain States region dipped slightly to 52.1 from March’s 54.2.  The import reading for the month expanded to 57.9 from 57.4 in March.  “Healthy growth among Mountain States’ firms pushed buying from abroad to April’s healthy level.  Firms in the region continue to expand sales abroad, albeit slowly, even with lackluster global economic growth,” said Goss
Other Components: Other components used to calculate the overall index for April were new orders at 58.9, up from 54.7 in March; production or sales at 57.3, up from 56.8; and delivery lead time at 53.3 which was higher than March’s 51.6.
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 well above growth neutral for April.  The overall index, termed the Business Conditions Index, declined to a still healthy 58.2 from March’s 60.8.  Components of the Business Conditions Index for April were new orders at 55.8, production or sales at 55.6, delivery lead time at 49.1, inventories at 70.3, and employment at 59.9.  “The turnaround in the state’s construction industry has been an important and positive driver of the economy. Colorado has now regained all of the jobs lost during the national recession.  Furthermore, the state is adding jobs at approximately twice the pact of the nation.  Our surveys over the past several months indicate that this favorable gap for Colorado will continue for the next 3 to 6 months.
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 April rose to 57.8 from March’s 53.3.  Components of the Business Conditions Index for April were new orders at 58.4, production or sales at 59.0, delivery lead time at 52.4, inventories at 63.5, and employment at 55.9.  “Utah’s current employment level is 23,000, or 1.8 percent, above its pre-recession level. At this point in time, the state is adding jobs at almost three times the rate of the nation.  Our surveys over the past several months indicate that this very healthy pace will continue for at least the next 3 to 6 months as manufacturers tied to international markets  and to housing continue to expand,” 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 42 straight months.  The index, termed the Business Conditions Index, expanded to a healthy 64.2 from March’s 58.3.  Supported by NAPM-Western Wyoming (http://www.ism.ws/sites/westwyoming/index.htm), surveys over the past several months point to positive and improving economic growth in the state economy for the next 3 to six months.  Components of the overall index for April were new orders at 61.9, production or sales at 53.2, delivery lead time at 70.5, inventories at 80.1, and employment at 55.1.  “Wyoming’s growth has been choppy with the state’s current employment level 3,500, or 1.1 percent, below its pre-recession level.  The state will continue to add jobs in manufacturing and non-manufacturing returning to pre-recession employment levels by the end of summer of this year,” said Goss.
May results will be released on June 3, the first business day in June.
For historical data and forecasts, visit our website at:
www.ernestgoss.com  or
www.outlook-economic.com
www.twitter.com/erniegoss
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