OMAHA, Neb. (Sept. 1, 2021) – The MidAmerica Business Conditions Index (BCI), a leading economic indicator for a nine-state region that includes Iowa and Nebraska, has remained growth-neutral for 15 of the last 16 months. The survey by Creighton University director of Economic Forecasting Dr. Ernie Goss, ranges between 0 and 100. An index greater than 50 indicates an expansionary economy over the course of the next three to six months.

As of the latest report, the Index had fallen to a still healthy 68.9 in August, from July’s 73.1. Supply managers reported that supply chain bottlenecks represented the greatest challenge for the next 12 months and was restraining growth.  Iowa’s Business Conditions Index for August climbed to 68.2 from 67.9 in July.  Looking ahead six months, economic optimism, as captured by the August Business Confidence Index, dipped to 53.5 from July’s 53.6.  This is the third straight month that the index has declined.

Components of the overall July index were: new orders at 77.2, production, or sales, at 63.2, delivery lead time at 84.3, employment at 61.4, and inventories at 54.8. “Both durable goods and nondurable goods producers in the state are expanding at a solid pace. Metal products manufacturing and food producers are experiencing very healthy growth,” said Goss.

According to Goss, “Creighton’s monthly survey results indicate the region is adding manufacturing business activity at a healthy pace, and that regional growth will remain positive, but somewhat slower.  Supply chain bottlenecks and labor shortages remain obstacles to growth. Approximately 94% of supply managers reported supply chain bottlenecks for the month with half of those detailing significant supply disruptions,” he said.

The regional employment index remained above growth neutral for August, but sank to 64.6 from July’s two decade high of 67.2. “Even with strong manufacturing job growth, the region has yet to recover all job losses from the pandemic. The latest U.S. Bureau of Labor Statistics data indicate that current regional nonfarm employment is down by 431,000 jobs, or 3.3%, compared to pre-COVID-19 levels,” said Goss. Even with healthy job growth for the month, firms continue to report difficulties in finding and hiring new workers. One of five supply managers said finding and hiring qualified workers will be the greatest challenge for the next 12 months. One supply manager asked “Where did all the workers go?”

Other comments from supply mangers in the August survey were:

•   “Very difficult to get balance. Feel like a ‘fiddler on the roof.’”
•   “There has been a significant movement away from plastic products to paper-based packaging. This has significantly added to an already constrained market.”
•   “We are a heavy and medium duty truck dealership with sales, rental/leasing, service, parts and collision centers. Biggest challenges are delays on factory orders of new trucks with demand far outpacing supplies/deliverable orders.”
•  “Supply bottlenecks on assembly parts, collective bargaining work stoppages impacting new truck production, driver shortages are all impacting our sales efforts.”

The wholesale inflation gauge for the month slipped to 95.0 from July’s record high 98.7. Said one supply manager, “(It) will take a long time to catch up to demand, passing along rising prices does not seem to be denting demand.” As reported by supply managers, rising input prices represented the second greatest challenge or threat faced by their firm over the next 12 months. “At the wholesale level, Creighton’s survey is tracking higher and higher inflationary pressures.  Commodity prices are up approximately 20.9% over the last 12 months, according to U.S. Bureau of Labor Statistics data. Supply managers in Creighton’s June survey expect prices for their firm’s products to advance by 7.7% for the next 12 months,” said Goss.

The regional inventory index, reflecting levels of raw materials and supplies, plummeted to 54.9 from 70.7 in July.  Despite supply chain bottlenecks, regional trade numbers were solid for the month. The new export orders index expanded to a very healthy 64.7 from July’s 63.9. Supply bottlenecks pushed the August import reading to a lower 52.4 from 65.3. Other survey components of the August Business Conditions Index were: new orders advanced to 75.8 from 73.5 in July; the production or sales index declined to 65.0 from July’s 67.9; and the index reading for the speed of deliveries of raw materials and supplies was unchanged from July’s index of 84.5. A higher reading indicates slower deliveries.