FOR MORE INFORMATION CONTACT:
Ernie Goss (402) 280-4757
[email protected]
Cindy Workman (402) 280-2969
[email protected]
INFLATIONARY PRESURES IN MID-AMERICA REGION ON THE DECLINE
FOR IMMEDIATE RELEASE: July 3, 2000
OMAHA, Neb. -- The prices paid index was down for the third consecutive month in June, according to the June Mid-America Business Conditions survey of purchasing managers. However, concern over higher fuel prices and interest rates took its toll on confidence among purchasing mangers in the survey.
The overall index also saw a decline for the third straight month to 53.0, compared to 57.1 in May. June's overall reading was the lowest index recorded since January of 1999. A large drop in production from a May index of 62.0 to a June reading of 51.9 was the prime factor pushing the overall index lower. The prices paid index for June was 72.6, down from 75.8. This was the lowest prices-paid index since December of 1999 and provides evidence that the Fed interest rate hikes are beginning to have an impact.
"Furthermore, the decline in the overall index is evidence that the past rate hikes by the Fed are having an impact, albeit a modest one, on the rate of growth for the nine-state region. Purchasing managers report that higher interest rates have put some projects on the back burner for now. While the Fed didn't raise interest rates at it's June meeting, the door is still open for another move by the Fed to raise rates at their next meeting in August," Creighton University Economics Professor Ernie Goss said today.
Confidence among purchasing managers in the nine-state region declined sharply to 46.9 for June compared to 50.4 in May. Higher oil prices and higher interest rates had a significant negative impact on respondents' assessment of future economic conditions six to nine months out," said Goss. The June export index dropped for the fourth consecutive month to 46.9 in June, compared to 47.6 in May. "This was the third month in a row that the export index was below 50 and it's also the lowest reading recorded since January of 1999. Continued strength in the dollar is making U.S. goods expensive overseas and is the prime factor contributing to the sluggishness in regional exports," said Goss, who holds the Jack A. MacAllister Chair in Regional Economics. Goss releases the Mid-America Survey of Business Conditions on a monthly basis in conjunction with the national PMI. He conducts a monthly survey of purchasers in nine states to produce the leading economic indicator of the Mid-American economy. States included in the survey are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota. The survey is supported by a grant from Norwest Nebraska Foundation and by purchasing management associations in those states. The National Association of Purchasing Management began to formally survey its membership to gauge business conditions in 1931. Goss uses the same methodology as the national survey. The overall index ranges between 0 and 100. An index number greater than 50 indicates an expansionary economy. Here are the individual purchasing management index figures for each state included in the survey and a brief analysis of the index:
--ARKANSAS: The June survey of Arkansas purchasing managers dropped to 54.1 from May's solid reading of 56.5. "Higher interest rates in the state slowed economic conditions in the state as the overall index declined for the second consecutive month. While durable goods manufacturers report solid growth, non-durable goods manufacturers indicated some contraction in economic activity for June. A large drop in the employment index from May's 59.3 to June's 54.2 was the prime factor pushing the overall reading lower. Respondents in the June survey indicated that higher interest rates were causing their firms to cut-back on construction projects. The slowing in economic growth in the state resulted in a sharp decline in the confidence index to 37.5 from May's 57.4 as survey respondents were much less optimistic about the economic outlook six to nine months out," said Goss.
--IOWA: Iowa purchasing managers reported somewhat softer economic conditions in the state with a June reading of 53.4. This was down from May's 57.3 and represents the second consecutive month that the state's overall index has declined. While this is the lowest reading for the state since December of 1999, June's survey continues to point to a growing state economy, albeit at a slower rate. A sharp decline in production from 62.2 in May to 52.4 was the prime factor pushing the overall reading lower. The reduced production appeared to be concentrated in the state's non-durable goods manufacturing sector," said Goss. Iowa's June confidence index was 48.8, down from May's 54.9.
--KANSAS: The overall index for Kansas increased to 61.5 from May's overall reading of 55.7. "This upturn for Kansas was unexpected. While the Kansas economy continues to expand, higher interest rates and higher energy prices had begun to slow economic growth in the state, particularly in the durable goods sector. A very strong production reading of 67.7 and a new orders index of 61.8 pushed growth higher in the state for June. However, I expect higher interest rates and higher energy prices to begin to take their toll in coming months with somewhat slower growth for the state in the latter half of 2000," said Goss. The June confidence index for Kansas was a regional high of 61.8, up from May's 58.4.
--MINNESOTA: Minnesota's overall index dropped for the sixth consecutive month to a reading of 43.2 for June, down from May's 45.4. "While improved conditions in the state's farm economy have improved conditions for businesses closely tied to agriculture, higher interest rates and higher fuel prices are significantly slowing growth in the Minnesota economy. Minnesota's production reading of 34.5 and new orders of 41.7 reflect a significant softening in the state's economy over the coming months. However, at this time, Minnesota surveys point to more of a pause in economic growth rather than a real downturn," said Goss. Minnesota's confidence index of 26.7 was a regional low and indicates substantial pessimism among survey participants regarding economic conditions in the next six to nine months.
--MISSOURI: Missouri's overall index stood at a very solid 59.6 for June, down slightly from May's 61.4. "We are seeing very strong growth in St. Louis and Kansas City with slower growth in the rest of the state. While higher interest rates have slowed construction projects at firms in the state, production activity remains brisk with a June production index of 64.6 and a new orders reading of 66.7. A relatively strong employment index of 53.6 indicates that, despite significant labor shortages facing most firms, businesses have been able to expand jobs in the state for the month of June," said Goss. Missouri's June confidence index of 46.4, down from May's 55.3, points to less optimism among respondents regarding economic conditions over the next six to nine months.
--NEBRASKA: Nebraska's overall index dropped for the third consecutive month to 53.9 from May's 59.8. "This is lowest reading for the state since August of 1999 and indicates that higher interest rates are beginning to slow growth in the state. Significant declines in June new orders to 50.0 from May's 56.6, and in June production to 53.8 from May's 63.9, were primarily responsible for June's decline. Not surprisingly, survey respondents in Nebraska indicated that higher fuel costs were negatively affecting their businesses," said Goss. Optimism regarding economic conditions in the state over the next six to nine months were not strong with a June confidence index of 44.6.
--NORTH DAKOTA: For the first time since January of this year, North Dakota's overall index descended below 50.0 with a June reading of 36.3, down from May's 52.8. "Higher fuel prices and higher interest rates are having a negative impact on economic growth in the state of North Dakota according to our June survey. Low June new orders of 25.0 and production of 25.0 were the primary factors pushing the overall reading lower," said Goss. Optimism regarding economic conditions in the state over the next six to nine months declined significantly for June with a confidence index of 29.2, a regional low.
--OKLAHOMA: For the third consecutive month, purchasing managers in Oklahoma reported an index below 50.0 with a June reading of 43.9, down from May's 44.9. "We are seeing sluggish growth in the state's manufacturing sector at the same time that the state's construction industry grows in the face of higher interest rates. Declines among the state's durable goods manufacturers was the major factor restraining growth in the state as June employment index dropped to 36.4, its lowest level in over a year," said Goss. Economic optimism among survey respondents regarding the next six to nine months reflects recent declines with a June confidence index of 40.9.
--SOUTH DAKOTA: South Dakota purchasing managers reported very strong economic conditions in the state with a June reading of 56.2. "While the overall reading for the state is down from May's super-charged 66.1, June's survey continues to show surprising strength in the South Dakota economy. Despite continuing labor shortages for much of the state, the June employment index stood at a very healthy 57.7 indicating expanding jobs for the state," said Goss. South Dakota's June confidence index of 42.3 was down significantly from May's 63.6 and indicates that higher fuel prices and higher interest rates are having a negative impact on respondents' assessment of economic conditions over the next six to nine months.
-30-
Visit the Business Conditions Website at: http://econews.creighton.edu/buscond/survey_results.htm
RSS