Inflation Pressures Down
April survey results at a glance:
- Leading economic indicator stays in very healthy range.
- Exports remain important contributor to growth.
- Inflation cools significantly for the month.
- Input prices expected to expand by a low 2.2 percent for rest of 2012.
- Almost four of ten firms indicated that regulatory burdens were biggest obstacle to growth.
Denver, CO – For the 30th 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 32 consecutive months (www.ism.ws) but has remained lower than the regional reading. As a result, growth in the Mountain States region is expected to exceed that of the U.S in the next 3 to 6 months.
Overall Index: The overall index, or Business Conditions Index, which ranges between 0 and 100, slipped to a healthy 58.8 from 62.6 in March. 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.
“Technology firms, especially those selling abroad, are experiencing healthy growth over the past several months. The Federal Reserve’s cheap money policy continues to support firms tied to international markets. I expect the national ISM reading to be down for the month when it is released later today. According to our surveys over the past several months, the regional growth advantage will continue in the months ahead. Expansions for the region’s technology sector, both manufacturing and value-added services, were important sources of growth for the month,” Goss Institute for Economic Research Director Dr. Ernie Goss said today.
“This month we asked supply managers federal action that would most positively affect their company’s growth. Almost four of ten, 39 percent, reported that a reduction in regulatory burdens would be the most beneficial to expanding sales and income. Another 39 indicated that a reduction in federal spending would be most supportive to growth for their industry while 9 percent advocated a corporate tax reduction as the most positive growth factor. No other public policy action garnered above single digit support,” 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 April employment index advanced to 62.2 from March’s 61.9. “Employment growth in the region remains much stronger that in the national economy. However the growth is very geographically diverse across the three-state region with some areas continuing to be negatively affected by the housing sector while others are reporting labor shortages connected to a rapidly expanding manufacturing sector,” said Goss.
Wholesale Prices: The prices-paid index, which tracks the cost of raw materials and supplies, slipped to a still robust 72.3 from 75.8 in March. “Even as prices for certain inputs continue to grow at an unsustainable pace, this pullback in overall input prices is very good news. This month we asked supply managers to project price hikes for the rest of 2012 for their input purchases. An overall and very modest 2.2 percent increase was anticipated. Approximately 43 percent of supply managers expect no increase in prices, or a price decline for the remainder of 2012. This downturn is certainly surprising to me but is likely the result of a slowing national economy,” said Goss.
Business Confidence: Looking ahead six months, economic optimism, as captured by the April business confidence index, advanced to 60.7 from 60.4 in March and 58.3 in February. “Recent downturns in fuel prices and an improving regional job market more than offset concerns surrounding the national and global economies, especially Europe,” 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. However, the index slumped to 55.6 from March’s 63.7. “This is the 29th 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: April’s export numbers for the Mountain States region sank to a still healthy 55.9 from March’s 61.9. April imports grew to 57.4 from March’s 54.0. “The export of manufactured goods, particularly technology and food, has been a very important contributor to regional growth. At the same time, the regional economic expansion has supported increased buying from abroad by companies in the region,” said Goss.
Other Components: Other components used to calculate the overall index for April were new orders at 58.5, down from March’s 64.8; production or sales at 60.8, down from 67.0; and delivery lead time at 57.1, up from 55.9 in March.
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, slipped to a still healthy level for April. The overall index, termed the Business Conditions Index, for April sank to 58.9 from March’s 61.4. Components of the Business Conditions Index for April were new orders at 59.9, production or sales at 60.6, delivery lead time at 51.6, inventories at 54.7, and employment at 67.7. “Metal manufacturers in the state are experiencing very healthy growth stemming from international markets. Construction activity is improving in the state. This is having a positive influence on firms that we survey. 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 moved 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 healthy 56.0 from 61.2 in March. Components of the Business Conditions Index for April were new orders at 56.9, production or sales at 59.1, delivery lead time at 56.0, inventories at 48.9, and employment at 58.9. “Construction hours and employment continue to expand and positively influence the firms that we surveyed for April. Computer and electronic component manufacturers in the state are posting solid expansions in new orders and production,” said Goss.
Wyoming: The state’s leading economic indicator from a survey of supply managers in the state climbed above growth neutral for the 30th straight month. The index, termed the Business Conditions Index, slipped to a very strong 68.5 from 70.2 in March. 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 April were new orders at 55.2, production or sales at 63.1, delivery lead time at 79.6, inventories at 75.9, and employment at 68.5. “Mining across the spectrum detailed healthy expansions for the month. Very low natural gas prices and the ever changing national coal policy have yet to slow growth in the state. Durable goods manufactures in the state, especially those tied to energy and exports, experienced very healthy growth over the past several months,” said Goss.
May results will be released on the first business day in June, or June 1.