Mountain States Leading Indicator Healthy for May:
~~~BY DR. ERNIE GOSS~~~
Hourly Wages Up for 2013
May survey results at a glance:
· Leading economic indicator points to continuing growth for the next 3 to 6 months.
· Approximately two-thirds of businesses report that the federal spending sequestration has had no impact on their business.
· Supply managers expect hourly wages to grow by 2.7 percent for the next year.
· Inflationary pressures at the wholesale level decline again.
For Immediate Release: June 3, 2013
Denver, CO – Similar to surveys over the past several months, the overall index for the Mountain States region for May, a leading economic indicator for the three-state area of Colorado, Utah and Wyoming, advanced to a very healthy reading. The May index from the survey of supply managers, as in past months, continues to exceed the national index (www.ism.ws) and point to regional growth significantly exceeding that of the U.S.
Overall Index: The overall index, or Business Conditions Index, which ranges between 0 and 100, climbed to 61.0 from 58.3 in April. 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.
“Durable and non-durable goods manufacturers in the region, particularly those linked to the region’s rapidly expanding construction industry, pushed the overall index higher. Even though agriculture prices have softened recently, companies with ties to agriculture continue to experience healthy but somewhat reduced economic growth,” 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 bounced well above growth neutral for the month. The hiring gauge climbed to a solid 57.1 from April’s 56.2. “The region is now adding jobs at more than twice the pace of the nation according to U.S. Bureau of Labor Statistics data. Our regional survey and national surveys of supply managers indicate that this gap is likely to remain for the next 3 to 6 months with the region adding jobs at an annual pace above three percent. As job prospects have improved, so has wage growth. Supply managers expect wages to advance by 2.7 percent over the next year,” said Goss.
Wholesale Prices: The prices-paid index, which tracks the cost of raw materials and supplies, sank to 59.5 from 65.7 in April. “Inflationary pressures at the wholesale level are definitely trending downward. A 5 percent decline in the value of the U.S. dollar thus far in 2013 and sluggish global economic growth have significantly slowed inflationary pressures in the region. This month supply managers reported they expect the prices of products and services that they purchase to increase at an annual pace of 5.8 percent. This is the same value recorded in January of this year and well above actual price growth.”
“Thus far, the Federal Reserve’s cheap money policy appears to be having little impact on inflationary pressures. The bigger problem in the Mountain States region has been the Fed’s impact on asset prices such as stocks, housing, farm and ranch land which continue to expand at rates that should be of concern,” said Goss.
Business Confidence: Looking ahead six months, economic optimism, as captured by the business confidence index, expanded to 61.0 from April’s 58.2. “The very significant turnaround in the region’s housing sector as well as healthy growth in businesses tied to energy and agriculture have boosted the economic outlook of supply managers. The federal spending sequestration is having little impact on the regional economy or the outlook. The last three months, we have asked supply managers how the federal spending sequestration was affecting their company. Approximately two-thirds, or 68.4 percent, of supply managers in May indicated that the cuts have had no impact on their company to date. Almost one-third, or 31.6 percent, reported only modest impacts,” said Goss.
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 42 straight months. Healthy inventory growth normally signals that supply managers expect production and/or sales advances 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 rose to 57.3 from April’s 52.1. The import reading for the month dipped to 56.2 from 57.9 in April. “Given the 2013 gains in the value of the U.S. dollar, the strength in sales abroad was somewhat surprising,” said Goss.
Other Components: Other components used to calculate the overall index for May were new orders at 61.4, up from 58.9 in April; production or sales at 60.6, up from last month’s 57.3; and delivery lead time at 56.9, higher than April’s 53.3.
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 May. The overall index, termed the Business Conditions Index, climbed to a strong 62.8 from 58.2 in April. Components of the Business Conditions Index for May were new orders at 59.1, production or sales at 52.8, delivery lead time at 74.5, inventories at 72.7, and employment at 55.0. “New orders and production are growing faster than jobs in the manufacturing sector. To accommodate this growth, manufacturers in the state are expanding the hourly work week for current employees much faster than jobs. On the other hand, businesses tied to the state’s rapidly advancing construction industry continue to experience very healthy business conditions,” 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 May rose to 59.9 from 57.8 in April. Components of the Business Conditions Index for May were new orders at 60.4, production or sales at 64.9, delivery lead time at 53.1, inventories at 64.3, and employment at 56.8. “Durable and non-durable goods producers in the state continue to expand employment as firms have experienced upturns in business activity. Despite this growth in jobs, the average hourly wage for manufacturing workers has grown by only 1.3 percent. Supply managers expect wages to expand by 2.7 percent over the next year as business conditions improve,” 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 43 straight months. The index, termed the Business Conditions Index, expanded to a very strong 67.8 from 64.2 in April. 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 May were new orders at 72.6, production or sales at 59.9, delivery lead time at 76.9, inventories at 68.4, and employment at 60.9. “Downturns in economic activity for businesses providing support for the state’s mining sector were more than offset by expansions among non-durable goods manufacturers in the state. As evidence of an expanding manufacturing sector in the state, hourly wages among producers have climbed by 4.0 percent over the past year, well above 2.7 percent expected by survey participants for the next year,” said Goss.
June results will be released on July 1, the first business day in July.
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