Mountain States Leading Economic Indicator Expands Again
Inflation Gauge Continues to Rise

February survey results at a glance:

• Business conditions index climbs above growth neutral for fifth straight month.
• Inflation gauge indicates elevated inflationary pressures in the pipeline.
• Business confidence remains high among supply managers.
• The improving global economy is pushing export orders higher.

For Immediate Release: March 1, 2010

Denver, CO –For a fifth 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 February climbed to 58.6 from January’s healthy 55.6. The index is pointing to improving economic conditions for the three-state region composed of Colorado, Utah and Wyoming in the months ahead.

“Readings over the past several months indicate that the regional economic rebound that is underway will pick up steam in the months ahead. Even so, I am concerned that the economic problems in Europe, which are pushing the value of the dollar higher, will negatively influence regional growth. This part of the nation depends heavily on exports and commodity prices which likewise suffer from a ‘too strong’ dollar. However, the likelihood of the regional economy dipping back into recessionary territory has diminished significantly according to our surveys of supply managers. While I expect the overall regional economy to expand in the months ahead, I continue to expect job growth to be subdued, especially for rural areas of the three-state region,” 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).

The February employment index rose to 54.7 from 52.8 in January. For February, 20 percent of supply managers reported job gains for their firms, while only 7 percent indicated that their firms reduced employment. “Despite this upturn, the regional labor market remains fragile with any upturn in hiring susceptible to national and global economic slumps,” said Goss.

Rebounding prices have accompanied the regional economic improvements. The prices-paid index, which tracks the cost of raw materials and supplies, dipped slightly to a still inflationary 68.5 from 70.9 in January. The prices-paid index is up by almost 50 percent from this time last year.

“Recently the Federal Reserve took the timid step of increasing the almost inconsequential discount rate by a quarter of one percent. Based on responses from supply mangers in our survey and my own analysis, I expect the Fed to raise the more important funds rate by a quarter percent before the end of the second quarter of this year. Inflation in the pipeline is well above the Fed’s soft target of 2.0 percent in my judgment,” said Goss.

Looking ahead six months, economic optimism, captured by the confidence index, slipped slightly to a still solid 62.8 from January’s 63.9. “Record low interest rates, a stabilizing job market and the January improvement in the nation’s unemployment rate buoyed the economic optimism of supply managers in the Mountain States region,” said Goss.

Trade numbers improved significantly for February as new export orders advanced to 54.0 from January’s 47.5. February imports expanded to 51.6 from 47.9 in January. “I expect the export of commodities and high tech hardware to be an important component of the 2010 regional economic expansion. As a result, recent increases in the value of the dollar, making U.S. goods less competitive abroad, are a concern,” 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 February inventory index climbed to 58.4 from 55.6 in January. “This is the third straight month that we have recorded inventory restocking after more than one year of inventory reductions,” said Goss.

Other components of the February Business Conditions Index were new orders at 61.7, up from January’s 59.1; production or sales at 62.4, up from 58.8; and delivery lead time at 56.0, up from 51.6.

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 fifth straight month, the state’s leading economic indicator rose above 50.0. The February index, based upon a survey of supply managers in the state, climbed to 58.8 from 56.2 in January. Components of the overall index for January were new orders at 61.9, production or sales at 62.6, delivery lead time at 56.1, inventories at 58.5, and employment at 54.9. “Manufacturing firms in the state have lost more than 12,000 jobs over the past year, or almost 7 percent of the state’s manufacturing base. Outside of manufacturing, telecommunications firms in the state continue to trim their work forces. Based on surveys over the past several months, I expect slight manufacturing job gains and very modest overall job growth for the state for the second quarter of 2010,” 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 rose to 55.8 from 52.7 in January and 55.0 in December. Components of the overall index for February were new orders at 59.5, production or sales at 60.3, delivery lead time at 49.9, inventories at 59.2, and employment at 50.2. “Manufacturing firms in the state have lost more than 11,000 jobs over the past year, or more than 7 percent of the state’s manufacturing base. Based on surveys over the past several months, I expect slight manufacturing job gains and flat overall job growth for the state for the second quarter of 2010,” said Goss.

Wyoming: The state’s leading economic indicator climbed above growth for a fourth straight month. The Wyoming Business Conditions Index for February jumped to 65.0 from January’s 62.8 and 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 economy is on the road to recovery. Components of the overall index for February were new orders at 63.8, production or sales at 65.9, delivery lead time at 68.7, inventories at 67.4, and employment at 59.2. “Despite improvements in our monthly reports, Wyoming continues to bleed mining jobs. These losses continue to spillover into the overall labor market. As a result, I expect the state to experience job losses through the second quarter of 2010,” said Goss.

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