April Mid-America Business Index tumbles to recession level

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April survey highlights:

• The Business Conditions Index plummeted to its lowest level since the great recession, February 2009.
• Employment reading slumped to its lowest level since the survey began in 1993.
• One-half of supply managers reported business stoppages for their vendors due to COVID-19.
• More than one-third of supply managers detailed shipping problems stemming from COVID-19.
• Between the second week of March to the first week of April, the number of unemployed in the 9-state region receiving unemployment compensation soared from 164,040 workers to 980,196.

Newswise — OMAHA, Neb. (May 1, 2020) – The April Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, plummeted for the month reaching its lowest level since the middle of the last U.S. recession.        

Overall index: After falling below growth neutral for March, the overall index slumped to its lowest level since February of 2009, almost the middle of the last recession. The Business Conditions Index, which ranges between 0 and 100, tumbled to 35.1 from March’s 46.7.

“According to Creighton’s April survey of regional manufacturing supply managers, the coronavirus had a less significant impact on the manufacturing sector than other areas of the economy more directly tied to the consumer. This is a consumer led recession with manufacturing lagging. As a result, I expect the manufacturing to worsen in next month,“ 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.  

Goss added that 50% of supply manager reported business stoppages for their vendors in Creighton’s April survey, while more than one-third detailed shipping problems.” 

As stated by one supply manager, “The train has slowed to almost a stop...Let's get this economy moving again.”

Employment: The April employment index slumped to a record low of 26.2 from March’s already weak 34.7.

“In the middle of March U.S. Department of Labor data showed that only 164,040 workers in the nine-state region were unemployed and receiving unemployment insurance benefits,” said Goss. “This represented only 1.3% of individuals covered by the unemployment insurance systems.  By the first week of April, 980,196 workers were receiving unemployment insurance benefits or 7.5% of covered worker.   

Wholesale Prices: The wholesale inflation gauge for the month indicated deflationary pressures at the wholesale level with a wholesale price index of 44.0, lowest index since the end of the last recession, or May 2009, and down from 55.2 in March.

“With oil prices ranging between $15 and $20 due to demand issues linked to COVID-19, I expect to see deflationary pressures in the weeks and months ahead despite the Federal Reserve’s, and the U.S. government’s record economic stimulus programs,” said Goss.

Confidence: Looking ahead six months, economic optimism, as captured by the April Business Confidence Index, rebounded to a still weak 45.5 from March’s record low 14.5.

“The federal stimulus plan, the Federal Reserve monetary incentive programs, and the rebound in U.S. stock markets boosted confidence from March’s record lows,” said Goss.

Inventories: The regional inventory index for April, reflecting levels of raw materials and supplies, sank to 36.9 from last month’s 50.0. 

In the April survey one supply manager reported, “Our orders are being canceled. Chinese armed forces have confiscated some of our products we had planned to use to combat the coronavirus. The U.S. government ordered Grainger to ship to them first, even though we have standing orders for N95 masks.”

Trade: The regional trade numbers were very negative for the month with new export orders tumbling to 19.4 from March’s 34.7. “On the other hand, international buying by supply mangers remained weak but increased to 38.7 from 32.7 in March,” reported Goss.   

Other survey components: Other components of the April Business Conditions Index were new orders at 21.0, down from March’s 40.0; the production or sales index sank to 23.3 from March’s 37.8; and speed of deliveries of raw materials and supplies index at 68.3 dipped slightly from last month’s 68.4 reflecting slower deliveries and/or shipping difficulties.      

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.

The forecasting group’s 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 Business Conditions 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 since 1931 by the Institute for Supply Management (ISM), formerly the National Association of Purchasing Management. The Mid-America report is produced independently of the national ISM.

Arkansas: The April Business Conditions Index for Arkansas sank to 35.1 from March’s 47.3. Components of the April index from the monthly survey of supply managers were: new orders at 21.0, production or sales at 36.9, delivery lead time at 68.2, inventories at 23.3, and employment at 26.1. “Between the second week of March, and the first week of April, workers in the state receiving unemployment compensation rose from 11,500, or 1.0% of workers covered by the unemployment system to 66,500 individuals, or 5.6%,” said Goss.

Iowa: The state’s Business Conditions Index, or overall index, once again slumped below growth neutral. The reading sank to 34.4 from 45.8 in March. Components of the overall April index from the monthly survey of supply managers were: new orders at 23.7, production or sales at 19.7, delivery lead time at 67.4, employment at 25.6, and inventories at 35.5. “Between the second week of March, and the first week of April, workers in the state receiving unemployment compensation rose from 27,800, or 1.8% of workers covered by the unemployment system to 127,300 individuals, or 8.3%,” said Goss. 

Kansas: The Kansas Business Conditions Index for April tumbled to 36.3 from March’s 48.3. Components of the leading economic indicator from the monthly survey of supply managers for April were: new orders at 23.2, production or sales at 39.2, delivery lead time at 69.7, employment at 27.0, and inventories at 22.5. “Between the second week of March, and the first week of April, workers in the state receiving unemployment compensation rose from 9,700, or 0.7% of workers covered by the unemployment system to 78,300 individuals, or 5.7%,” said Goss.

Minnesota: The April Business Conditions Index for Minnesota sank to 34.8 from March’s 45.5 Components of the overall April index from the monthly survey of supply managers were: new orders at 20.5, production or sales at 23.4, delivery lead time at 67.9, inventories at 22.5, and employment at 26.0. “Between the second week of March, and the first week of April, workers in the state receiving unemployment compensation rose from 61,700, or 2.2% of workers covered by the unemployment system to 341,500 individuals, or 11.9% of covered employment,” said Goss.

Missouri: The April Business Conditions Index for Missouri slumped to 35.1 from 45.3 in March.  Components of the overall index from the survey of supply managers for April were: new orders at 21.1, production or sales at 23.2, delivery lead time at 68.3, inventories at 37.0, and employment at 26.2. “Between the second week of March, and the first week of April, workers in the state receiving unemployment compensation rose from 22,300, or 0.8% of workers covered by the unemployment system, to 178,700 individuals, or 6.4%,” said Goss.

Nebraska: The state’s overall index for April dropped to 36.0 from 47.8 in March. Components of the index from the monthly survey of supply managers for April were: new orders at 22.7, production or sales at 22.7, delivery lead time at 69.3, inventories at 38.7, and employment at 26.8. “Between the second week of March, and the first week of April, workers in the state receiving unemployment compensation rose from 5,000, or 0.5% of workers covered by the unemployment system, to 60,400 individuals, or 6.3%,” said Goss.

North Dakota: The April Business Conditions Index for North Dakota plummeted to 35.8 from 46.8 in March. Components of the overall index for April were: new orders at 22.3, production or sales at 26.6, delivery lead time at 69.1, employment at 22.8, and inventories at 38.3. “Between the second week of March, and the first week of April, workers in the state receiving unemployment compensation rose from 6,300, or 1.5% of workers covered by the unemployment system, to 24,500 individuals, or 6.0%,” said Goss. 

Oklahoma:  Oklahoma’s Business Conditions Index once again declined below growth neutral in  April. The overall index for April slumped to 34.2 from March’s 45.7. Components of the overall April index were: new orders at 19.3, production or sales at 23.8, delivery lead time at 67.1, inventories at 38.3, and employment at 25.5. “Between the second week of March, and the first week of April, workers in the state receiving unemployment compensation rose from 16,400, or 1.1% of workers covered by the unemployment system, to 88,300 individuals, or 5.6%,” said Goss. 

South Dakota: The April Business Conditions Index for South Dakota tumbled to 35.9 from March’s 47.4. Components of the overall index from the April survey of supply managers in the state were: new orders at 22.4, production or sales at 22.8, delivery lead time at 69.2, inventories at 38.4, and employment at 26.7. “Between the second week of March, and the first week of April, workers in the state receiving unemployment compensation rose from 2,800, or 0.7% of workers covered by the unemployment system, to 14,400 individuals, or 3.5%,” said Goss. 

Survey results for May will be released on Monday, June 1, the first business day of the month.  

Follow Goss on Twitter at http://twitter.com/erniegoss

For historical data and forecasts visit our website at
http://business.creighton.edu/organizations-programs/economic-outlook