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Prof. Ernie Goss: January 2013 Mountain States Economy

Economist Ernie Goss of Creighton University

~~By Ernie Goss~~~

Mountain States Manufacturing Expands for January:
Offsets Weakness in Energy Sector

January survey results at a glance:

  • The region’s leading economic indicator climbed for the month.
  • Growth among manufacturers offset weakness in the regional energy sector.
  • Supply managers anticipate a 1.7 percent raise in wage rates for 2013.
  • Supply managers expect wholesale prices to expand by 2.9 percent in the next six months or 5.8 percent on an annualized basis.

For Immediate Release: February 1, 2013

Denver, CO – For the 39th 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 January index from a survey of supply managers continues to exceed the national index which crawled only slightly above growth neutral for December and January (www.ism.ws).

Overall Index: The overall index, or Business Conditions Index, which ranges between 0 and 100, climbed to 54.8 from 54.4 in December. 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 continue to expand at a healthy pace. Contrary to the nation as a whole, the region’s exports remain strong. Based on our survey results over the past several months, I expect both overall job and economic growth to continue on a positive trend and exceed that of the nation for the first half of 2013,” 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. The hiring gauge increased to 53.6 from 48.3 in December. “Expansions among durable and non-durable goods manufacturers more than offset pullbacks in the region’s large energy sector. The lack of any significant and consistent job growth has translated into supply managers expecting only a 1.7 percent wage increase for 2013,” said Goss.

Wholesale Prices: The prices-paid index, which tracks the cost of raw materials and supplies, rose slightly to 69.8 from 69.2 in December. “Never in the Federal Reserve’s 100 year existence has it been this aggressive in terms of expanding the nation’s money supply and in credit growth. However, this policy has yet to ignite inflationary pressures or significant job growth. Even so, our wholesale inflation gauge points to rising inflationary pressures. The bond yields on U.S. Treasury bonds has begun to rise as investors require higher interest rates to cover rising inflation,” said Goss.

This month we asked supply managers how much they expected prices for inputs that they purchase to increase in the next six months. On average, an annualized 5.8 percent growth in wholesale prices is expected. This increase is almost identical to the estimate from our July of 2012 when we asked this same question.
Business Confidence: Looking ahea
d six months, economic optimism, as captured by the business confidence index, slumped to 52.1 from December’s 57.7. “Washington DC political uncertainty weighed on confidence even as an improving housing sector boosted supply managers 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 slipped to 63.1 from December’s 64.2. “We have recorded inventory growth for 38 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 increased to 56.6 from 52.6 in December, while January imports sank to a solid 55.4 from 57.6 in December. “Healthy growth among Mountain States’ firms underpinned imports for the month as firms added to their purchases from abroad at somewhat slower pace,” said Goss
Other Components: Other components used to calculate the overall index for January were new orders unchanged from December’s 49.9; production or sales at 56.0, down from 58.2; and delivery lead time at 54.8, an increase from December’s 51.5.

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 January. The overall index, termed the Business Conditions Index, climbed to 54.4 from December’s 53.8. Components of the Business Conditions Index for January were new orders at 53.3, production or sales at 49.3, delivery lead time at 53.4, inventories at 62.7, and employment at 51.2. “Both durable and non-durable goods expanded at a solid pace for January and more than offset downturns in the state’s energy sector. The state’s construction industry continues to rebound, adding jobs at a positive pace,” 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 January advanced to 57.3 from December’s 54.2. Components of the Business Conditions Index for January were new orders at 51.8, production or sales at 57.3, delivery lead time at 52.9, inventories at 67.5, and employment at 56.8. “Durable and non-durable goods producers in the state continue to expand at a healthy pace offsetting downturns among energy linked firms,” 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 39 straight months. The index, termed the Business Conditions Index, declined to 53.8 from December’s 55.5. 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 first half of 2013. Components of the overall index for January were new orders at 45.5, production or sales at 60.5, delivery lead time at 47.7, inventories at 62.6, and employment at 52.7. “Our surveys over the past several months are tracking slower growth among manufacturers in the state and downturns for energy linked firms,” said Goss.

February results will be released on March 1, the first business day in March.

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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