Mountain States Leading Economic Indicator Begins Year
on Strong Note with Elevated Inflation

January survey results at a glance:

• Business conditions index climbs above growth neutral for fourth straight month.
• Firms added jobs in the region with anticipated layoffs down significantly.
• Inflation gauge indicates elevated inflationary pressures in the pipeline.

For Immediate Release: Feb. 1, 2010

Denver, CO –For a fourth straight month, the overall index for the Mountain States region, a leading economic indicator for the three-state area, moved above growth neutral 50.0.

The overall index, or Business Conditions Index, for January slumped to a still healthy 55.6 from December’s 59.1 and November’s 55.4. The index is pointing to improving economic conditions for the three-state region composed of Colorado, Utah and Wyoming in the months ahead.

The January employment index slipped to 52.8 from 53.2 in December and 49.9 in November. Based on surveys over the past several months, I expect the region to record positive, but modest job gains for the first quarter of 2010,” 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).

In November 2009 and again this month, we asked supply managers what their layoff expectations are for 2010. Between November and January the percentage of supply managers expecting layoffs in 2010 declined from 42 percent to 33 percent. On the other hand, the proportion expecting a pay increase in 2010 declined from 54 percent in November to 46 percent in January.

Rebounding prices have accompanied the improving economy. For the ninth time in the past ten months, the regional inflation gauge rose above growth neutral. The inflation gauge, which tracks the cost of raw materials and supplies, soared to 70.9 from December’s 54.5. “The regional prices-paid index has more than doubled over the past year. At its January meeting, the Federal Reserve interest rate setting committee said it expects subdued inflation trends ‘which warrant exceptionally low levels of the federal funds rate for an extended period.’ Supply manager surveys over the last several months run contrary to the Fed’s projection. I expect inflation at the consumer level to top 3.3 percent (annualized) as early as the middle of 2010. This is a full percentage point above the Fed’s acceptable level,” said Goss.

Looking ahead six months, economic optimism, captured by the confidence index, advanced to 63.9 from December’s 63.1. “Record low interest rates, improving housing markets and stabilizing unemployment rates are keeping the economic optimism high among supply managers in the Mountain States region,” said Goss.

Trade numbers worsened for January as new export orders plunged to 47.5 from December’s 63.7. January imports sank to 47.9 from December’s 70.9. “While the decline in new export orders for January was not good and unexpected, I still expect exports to be an important component of a 2010 economic expansion,” Goss said.

As another measure of economic confidence, supply managers in the three-state region added to inventories of raw materials and supplies for the month. The January inventory index dipped to a still healthy 55.6 from 66.1 in December. “This is the second straight month that we have recorded inventory restocking after more than one year of inventory liquidation,” said Goss.

Other components of the January Business Conditions Index were new orders at 59.1 down from 63.5 in December; production or sales at 58.8, down from 59.5; and delivery lead time at 51.6, down from 53.3.

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 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: For a fourth straight month, the state’s leading economic indicator rose above 50.0. The January index, based upon a survey of supply managers in the state, tumbled to a healthy 56.2 from December’s 62.8. Components of the overall index for January were new orders at 59.6, production or sales at 57.9, delivery lead time at 53.8, inventories at 55.6, and employment at 55.7. “Business activity for the month was much stronger for durable goods producer than for non-durable goods manufacturers. High tech manufacturing is improving in the state as telecommunications firms experience weaker economic conditions,” said Goss.

Utah: The state’s Business Conditions Index, a leading economic indicator, once again climbed above growth neutral 50.0. Based on the monthly survey of the membership of NAPM-Utah (www.napmutah.org), the overall index stood dipped to 52.7 from December’s 55.0. Components of the overall index for January were new orders at 58.5, production or sales at 60.1, delivery lead time at 42.3, inventories at 57.2, and employment at 45.5. “Manufacturing in Utah has not improved as significantly as in Colorado. Expansions in new orders and production for the month failed to generate job gains for durable and non-durable producers. I do expect job gains in the months ahead however,” said Goss.

Wyoming: The state’s leading economic indicator climbed above growth for a third straight month. The Wyoming Business Conditions Index for January sank to 62.8 from December’s 64.4. Supported by NAPM-Western Wyoming (http://www.ism.ws/sites/westwyoming/index.htm), surveys over the past several months indicate that the state’s economic prospects will brighten in the months ahead. Components of the overall index for January were new orders at 56.2, production or sales at 60.3, delivery lead time at 73.0, inventories at 63.3, and employment at 61.2. “We are recording improving conditions in the state’s manufacturing and mining sectors. I expect this to show up in the overall state economy in the first half of 2010. However past negative momentum will continue to weigh on the state’s overall job picture,” said Goss.

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