September’s Mid-America Manufacturing Index Slumps Fear of Longshoremen’s Strike Pushes Inventories Higher

September 2024 Survey Highlights:

For the fifth time this year, the overall, or Business Conditions Index, sank below growth neutral.
After six straight months of falling wholesale prices, the inflation gauge rose for the month.
Almost four of 10 supply managers named higher inflation as the top challenge to their firm over the next year.
On average, supply managers expect input prices to rise by 6.2% over the next 12 months.
The region’s employment index slumped below growth neutral for a ninth straight month.
The fear of an October Longshoremen’s strike pushed inventories higher in all nine
Mid-America states. 

Supply managers remained pessimistic regarding the economic outlook, with approximately 62% expecting a recession, or a sharp downturn in economic activity in the next 6 months.
As a result of a cooling 2024 economy and waning inflationary pressures, Goss expects the Federal Reserve to cut interest rates by 0.25% at their November 6-7, 2024 meetings.
 

OMAHA, Neb. (October 1, 2024) — For the fifth time in 2024, the Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, slumped below the 50.0 growth neutral threshold.

Overall Index: The Business Conditions Index, which uses the identical methodology as the national Institute for Supply Management (ISM) and ranges between 0 and 100 with 50.0 representing growth neutral, declined to 48.1 from 48.7 in August and represents the ninth time in 2024 that the index has drifted around growth neutral.

“The overall index, much like the U.S. reading, has vacillated around growth neutral since December of 2023. Additionally, supply managers remained concerned about inflationary pressures, with an average 6.2% growth in input prices expected over the next year,” said Ernie Goss, PhD, director of Creighton University’s Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics in the Heider College of Business.

The Mid-America report is produced independently of the national ISM.

When asked to identify the top economic challenges over the next six months for their firm; 39.1% named higher inflation; 21.7% reported supply chain disruptions; 13.0% listed higher interest rates; 8.7% noted China trade skirmishes; and the remaining 17.5% named other issues.   

Employment: After climbing to growth neutral for December, the employment gauge has tumbled below 50.0 for the past nine months. The September employment index sank to 44.3 from 45.2 in August. Despite falling manufacturing employment, almost 18% reported a shortage of workers in the September survey. 

U.S. Bureau of Labor Statistics data show that seasonally adjusted regional manufacturing employment fell by 4,900 jobs (0.3%) in 2024 thus far. 

Comments from supply managers in September:

“Finding people to work is not difficult but keeping them busy is tough at times.”
“My gut-feeling is that we will continue to see manufacturing contraction which will reduce supply input costs and somewhat reduce the tight labor market.”
“Inflation is the hidden tax that has DRAMTICALLY disrupted business and personal finances.”
“From a labor perspective, the USA STOPPED all programs to both teach and RESPECT hands-on labor.”
“We are forecasting a flat end of year, with a potential for growth in the first and second quarter of 2025.”
“The Biden/Harris administration continues to make decisions based solely on getting re-elected rather than what is best for America and its voters. DEI, illegal immigration, climate change (i.e. Milankovitch cycles), elimination of gas, defunding the police, soft on crime and other regressive policies continue to divide the country and drive it further into chaos.”
“The East/Gulf Coast Longshoremen’s strike could negatively impact us.”

Wholesale Prices: The September price gauge climbed to 56.6 from August’s 56.2. “This is the first increase in the inflation gauge after six straight months of declines. The regional inflation yardstick has clearly declined into a range indicating inflationary pressures moving toward the Federal Reserve’s target. As a result, I expect the Fed to cut interest rates by 25 basis points (0.25%) at its next meeting on November 6-7,” said Goss.

Confidence: Looking ahead six months, economic optimism, as captured by the September Business Confidence Index, slumped to 26.2 from 26.7 in August. “Approximately 62% of supply managers expect a recession or worsening business conditions over the next six months,” said Goss.

Inventories: The regional inventory index, reflecting levels of raw materials and supplies, rose to 51.4 from 45.5 in August. “Due to the potential for an East Coast Longshoremen’s strike in the first week of October, supply managers added to their level of inventories in September,” said Goss. 

One supply manager said, “The East/Gulf Coast Longshoremen’s strike could negatively impact us.”

Trade: The strong dollar continues to make U.S. goods less competitively priced abroad and pushed the export index down to 49.3 from 50.0 in August. A weakening regional economy pushed the import reading down to 43.1 from 45.1 in August.

Other survey components of the September Business Conditions Index were: new orders dropped to 44.8 from 50.9 in August; the production or sales index fell to 44.9 from 47.2 in August; and the speed of deliveries of raw materials and supplies was unchanged from August’s 55.0. This reading indicates no change in supply chain disruptions and delivery bottlenecks for the month.

The Creighton Economic Forecasting Group has conducted the monthly survey of supply managers in nine states since 1994 to produce leading economic indicators of the Mid-America economy. States included in the survey are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma, and South Dakota.

Below are the state reports:

Arkansas: The state’s Business Conditions Index expanded to 53.8 from 44.8 in August. Components from the September survey of supply managers were: new orders at 43.9; production or sales at 45.6; delivery lead time at 68.1; inventories at 54.1; and employment at 57.4. According to the latest U.S. Bureau of Labor Statistics (BLS) seasonally adjusted data, Arkansas expanded manufacturing jobs by 3,100, or +2.9%, thus far in 2024. 

Iowa: The state’s Business Conditions Index for September sank to 43.3 from 44.5 in August. Components of the overall September index were: new orders at 40.0; production or sales at 32.8; delivery lead time at 46.4; employment at 41.2; and inventories at 56.2. According to the latest U.S. Bureau of Labor Statistics (BLS) seasonally adjusted manufacturing data, Iowa lost 3,800 manufacturing jobs, or -2.5%, thus far in 2024. 

Kansas: The Kansas Business Conditions Index for September rose to 48.8 from 46.5 in August. Components of the leading economic indicators from the monthly survey of supply managers for September were: new orders at 42.6; production or sales at 41.6; delivery lead time at 61.2; employment at 47.4; and inventories at 51.0. According to the latest U.S. Bureau of Labor Statistics (BLS) seasonally adjusted manufacturing data, Kansas lost 600 manufacturing jobs, or -0.5%, thus far in 2024. 

Minnesota: The September Business Conditions Index for Minnesota fell to 42.5 from August’s 44.9. Components of the overall September index were: new orders at 39.8; production or sales at 32.3; delivery lead time at 45.6; inventories at 54.1; and employment at 40.9. According to the latest U.S. Bureau of Labor Statistics (BLS) seasonally adjusted manufacturing data, Minnesota lost 6,000 manufacturing jobs, or -2.8%, thus far in 2024. 

Missouri: The state’s September Business Conditions Index increased to 45.7 from 45.5 in August. Components of the overall index from the survey of supply managers for September were: new orders at 41.4; production or sales at 37.8; delivery lead time at 54.5; inventories at 50.4; and employment at 44.6. According to the latest U.S. Bureau of Labor Statistics (BLS) seasonally adjusted manufacturing data, Missouri gained 2,700 manufacturing jobs, or +1.4%, thus far in 2024. 

Nebraska: For the fifth time in the past six months, Nebraska’s overall index rose above growth neutral. However, the state’s September Business Conditions Index declined to 51.5 from 56.4 in August. Components of the index from the monthly survey of supply managers for September were: new orders at 43.0; production or sales at 51.3; delivery lead time at 63.4; inventories at 51.2; and employment at 48.3. According to the latest U.S. Bureau of Labor Statistics (BLS) seasonally adjusted manufacturing data, Nebraska gained 2,400 manufacturing jobs, or +3.4%, thus far in 2024. 

North Dakota: After five straight months of below growth neutral readings, the state’s overall index advanced above growth neutral for a second consecutive month. The state’s overall, or Business Conditions Index, increased to 50.8 from 50.7 in August. Components of the overall index for September were: new orders at 43.5; production or sales at 44.4; delivery lead time at 65.8; employment at 49.3; and inventories at 51.1. According to the latest U.S. Bureau of Labor Statistics (BLS) seasonally adjusted manufacturing data, North Dakota gained 600 manufacturing jobs, or +3.2%, thus far in 2024.

Oklahoma: The state’s Business Conditions Index sank to 45.7 from August’s 48.0. Components of the overall September index were: new orders at 41.5; production or sales at 37.8; delivery lead time at 54.8; inventories at 50.9; and employment at 44.7. According to the latest U.S. Bureau of Labor Statistics (BLS) seasonally adjusted manufacturing data, Oklahoma lost 1,700 manufacturing jobs, or -1.8%, thus far in 2024. 

South Dakota: The September Business Conditions Index for South Dakota sank to 43.1 from August’s 44.5. Components of the overall September index were: new orders at 40.3; production or sales at 33.8; delivery lead time at 48.1; inventories at 51.1; and employment at 41.9.

According to the latest U.S. Bureau of Labor Statistics (BLS) seasonally adjusted manufacturing data, South Dakota lost 1,600 manufacturing jobs, or -5.3%, thus far in 2024. 

Survey results for the month of October will be released on November 1, 2024, the first business day of the month.