Michael Dekker
Tulsa World Business Writer
After climbing for five straight months, a leading economic indicator of manufacturing growth for a nine-state region — including Oklahoma — fell below that mark for a second straight month.
The Creighton University Mid-America Business Conditions Index ranges between 0 and 100 — with 50.0 representing growth neutral — increased to 49.5 in August from 46.1 in July for the region.
“The Mid-America regional manufacturing economy is definitely losing momentum,” said Ernie Goss, director of Creighton University’s Economic Forecasting Group in Omaha, Nebraska. “Government data indicate that the regional manufacturing economy has lost jobs for the last three months.
“Creighton University’s survey results indicate that contrary to the Federal Reserve consensus, a recession in 2023 is still ‘on the table.’ Approximately 45% of supply managers expect a recession in the second half of 2023,” Goss said.
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“The rapid expansion in federal government spending will push the Federal Reserve to keep its foot on the economic brakes via raising short-term rates,” he said.
“I expect one more rate hike in quarter four of 2023 with no change at the Fed’s Sept. 19-20 meetings. Furthermore, I expect Federal Reserve Chair Jerome Powell to restate the Fed’s commitment to reducing the Fed’s balance sheet, which will put upward pressure on long-term interest rates,” Goss said.
Employment
The regional hiring gauge slumped below growth neutral to 47.7, up from 45.6 in July. According to U.S. Bureau of Labor Statistics data, seasonally adjusted manufacturing employment in the region has decreased for three consecutive months. Creighton’s monthly survey results indicate these manufacturing job losses will increase in the months ahead.
“For the first half of 2023, Creighton’s monthly survey indicated steady employment growth with levels maintained due to manufacturers’ labor hoarding. However, employment readings over the past several months signal layoffs in the region,” Goss said.
Managers’ comments
Creighton and Goss keeps survey respondents anonymous.
The report said: “As reported by one supply manager, ‘Why can’t we hire the people we need — why can’t the government allow us to hire the illegals they let in?’”
Other August comments from anonymous supply managers, according to the report:
“The dark times are upon us. ... Inflation is a huge anchor on the overall economy and is the tax most people don’t even comprehend.”
“The grocery market industry is still in a steady growth pattern for new and remodeled stores. Our business is manufacturing merchandising fixtures for the grocery industry. Looks pretty solid at least through the rest of 2023.”
“Orders and shipments are down between 2023 and 2022.”
“We are going to have to pay the piper at some point as we can’t keep printing money and increasing interest rates and consumer prices without some significant consequences.”
“There are markets with reduced sales, but to call it a recession would be misleading.”
“I’ve been waiting for this ‘recession’ since Obama was in office. I thought the ramped-up printing of money then would have caused hyper-inflation, and with everything that’s happened since, it still hasn’t. Since we don’t have a free market anymore, I just don’t know what to think.”
“We are seeing mixed signals, with some industries such as RVs, lawn care, etc. slowing down, while others in the agriculture and construction industries seemingly not affected by a slowdown in the economy.”
Confidence
Looking ahead six months, economic optimism as captured by the August Business Confidence Index slumped to 26.3 from July’s weak 32.6. “Approximately 45% of supply managers expect a recession in the next six months,” Goss said.
The regional inventory index, reflecting levels of raw materials and supplies, expanded to 54.6 from July’s 52.3. “Manufacturing firms have been expanding inventory levels since February of this year,” Goss said.
Despite the recent downturn in exports, U.S. International Trade Association data indicate that the region expanded exports in the first half of 2023. Manufacturing exports expanded to $46.7 billion from $44.4 billion during this same time period in 2022, indicating growth of 5.2%.
New orders increased to 45.3 from 43.5 in July; the production or sales index rose to 47.8 from 41.3; and the speed of deliveries of raw materials and supplies climbed to 52.3 from July’s 47.3. The increase indicates an upturn in supply chain disruptions and delivery bottlenecks for the month.
Oklahoma slips
Oklahoma’s Business Conditions Index slumped below growth neutral for a third straight month.
The August index increased to 46.9 from 41.1 in July. Components of the overall August index were: new orders at 45.4, production or sales at 47.0, delivery lead time at 52.1, inventories at 46.8 and employment at 43.0.
According to U.S. International Trade Association data, Oklahoma’s manufacturing exports contracted from $3.2 billion for the first half of 2022 to $2.9 billion for the same period in 2023, representing a decline of 9.0%.
The state’s leading manufacturing export, machinery, contracted by 6.1% from 2022 to 2023.
The Creighton Economic Forecasting Group has conducted the monthly survey of supply managers in nine states since 1994 to produce leading economic indicators of the Mid-America economy.
States included in the survey are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.
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