March 2012 Mountain States Economy
Exports Support Healthy Mountain States’ Index:
Skilled Labor Shortages for Parts of the Region
March survey results at a glance:
- Rising exports pushed the region’s leading economic indicator into healthy range.
- New hiring was strong for the month.
- Inflation gauge signals excessive wholesale inflation in the months ahead.
- Shortages of skilled manufacturing workers reported for many parts of region.
- Approximately 83 percent of firms report fuel suppliers adding fuel surcharges.
For Immediate Release: April 2, 2012
Denver, CO – For the 29th straight month, the overall index for the Mountain States region, a leading economic indicator for the three-state area of Colorado, Utah and Wyoming, advanced above growth neutral 50.0. The national index has risen above growth neutral for 31 consecutive months (www.ism.ws) but has remained lower than the regional reading. Growth in the Mountain States region has exceeded that of the U.S. According to our surveys over the past several months, that advantage will continue in the months ahead. Expansions tied to exports, energy and agriculture account for the Mountain States’ advantage.
Overall Index: The overall index, or Business Conditions Index, which ranges between 0 and 100, slipped to a strong 62.6 from 62.8 in February. An index of 50.0 is considered growth neutral. The overall 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 by the national Institute for Supply Management.
“Only a significant upturn in oil prices or a catastrophe such as last year’s Japanese Tsunami will derail this expansion. Thus far, higher gasoline and fuel prices have failed to slow growth in the region. Firms with close ties to agriculture and energy as well as businesses selling internationally continue to lead the regional economy. The Federal Reserve’s cheap money policy continues to support firms tied to energy and those selling in international markets,” Goss Institute for Economic Research Director Dr. Ernie Goss said today.
“This month we asked supply managers how their suppliers were dealing with higher fuel prices. Approximately 83 percent indicated that suppliers were adding fuel surcharges to the cost of supplies while 17 percent of suppliers absorbed the added costs,” said Goss.
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).
Employment: The March employment index advanced to 61.9 from 61.2 in February. “Employment growth in the region is accelerating with reports of labor shortages for skilled manufacturing workers. Over the past year, the region has added almost 86,000 jobs, for annual growth of 2.7 percent. Based on our surveys over the past several months, this rapid growth should continue in the months ahead,” said Goss.
Wholesale Prices: The prices-paid index, which tracks the cost of raw materials and supplies, expanded to a robust 75.8 from February’s inflationary 74.8. “While much of the growth has been driven by higher energy prices, supply managers report rapidly increasing prices for a broad range of supplies they purchase. Supply managers reported sharp increases in food, chemicals and metal products for the month. While the expanding economy has been an important factor pushing prices higher, the Federal Reserve’s (Fed) easy money policy has been a big contributor to increases in our inflation gauge. I expect the Fed to begin raising rates well before their announced date of 2014. In my judgment, the Fed’s pro-growth stance poses significant inflation risks,” said Goss.
Business Confidence: Looking ahead six months, economic optimism, as captured by the March business confidence index, advanced to 60.4 from 58.3 in February. “Lower unemployment rates and an expanding national economy more than offset concerns surrounding higher energy and fuel prices,” said Goss.
Inventories: In another signal of an improving outlook, supply managers in the three-state region added to inventories of raw materials and supplies for the month. The index dipped slightly to a strong 63.7 from 64.1 in February. “This is the 28th straight month that we have recorded inventory growth. Healthy inventory growth signals that supply managers expect production expansions in the months ahead and is consistent with the strong business confidence reading for the month,” said Goss.
Trade: March’s export numbers for the Mountain States region advanced to a very healthy 61.9 from February’s 58.8. March imports declined to 54.0 from 58.1 in February. “The export of manufactured goods, particularly those connected to agriculture and energy, has been a very important contributor to regional growth. At the same time, the regional economic expansion has supported imports by regional companies,” said Goss.
Other Components: Other components used to calculate the overall index for March were new orders at 64.8, up from February’s 59.6; production or sales at 67.0, down slightly from 67.4; and delivery lead time at 55.9, down from 61.8 in February.
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 overall index is a mathematical average of new orders, production or sales, employment, inventories and delivery lead time.
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: The state’s leading economic indicator, based on a monthly survey of supply managers in the state, continued its upward trend in March. The overall index, termed the Business Conditions Index, for March climbed to 61.4 from 59.1 in February. Components of the Business Conditions Index for March were new orders at 67.8, production or sales at 66.9, delivery lead time at 52.3, inventories at 59.4, and employment at 60.3. “Both durable and non-durable goods manufacturers in the state are adding jobs at a healthy pace. Manufacturers tied to energy, agriculture and dependent on sales abroad are experiencing especially strong growth. As a result of this solid expansion, I expect the unemployment rate to continue to decline in the months ahead,” said Goss.
Utah: The state’s overall index, or Business Conditions Index, a leading economic indicator, once again remained above growth neutral 50.0. Based on the monthly survey of the membership of ISM-Utah (www.napmutah.org), the overall index dipped to a still very healthy 61.2 from 62.6 in February. Components of the Business Conditions Index for March were new orders at 63.9, production or sales at 65.1, delivery lead time at 56.5, inventories at 61.1, and employment at 59.6. “Both durable and non-durable goods manufacturers in the state are adding jobs at a healthy pace. Manufacturers tied to exports continue to experience very strong growth. Computer and electronic component manufacturers are expanding sales at a solid pace. As a result of this solid expansion, I expect Utah’s unemployment rate to decline below five percent for the first time since 2008 by the end of the third quarter of 2012,” said Goss.
Wyoming: The state’s leading economic indicator from a survey of supply managers in the state climbed above growth neutral for the 29th straight month. The index, termed the Business Conditions Index, climbed to a very strong 70.2 from 67.5 in February. Supported by NAPM-Western Wyoming (http://www.ism.ws/sites/westwyoming/index.htm), surveys over the past several months point to very healthy growth and lower unemployment rates for the state economy for the next 3 to 6 months. Components of the overall index for March were new orders at 60.4, production or sales at 76.2, delivery lead time at 75.9, inventories at 68.4, and employment at 70.3. “Durable goods manufacturers in the state, especially those tied to energy and exports, experienced very healthy growth over the past several months. As a result of the continuing economic expansion, I expect Wyoming’s unemployment rate to decline below five percent for the first time since 2009 by the end of the third quarter of this year,” said Goss.
April results will be released on the first business day in May, or May 1.