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March Mid-America Business Confidence Falls to Record Low
USAgNet - 04/02/2020

The March Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, plummeted for the month reaching its lowest level since September 2016.

Overall index: After advancing above growth neutral 50.0 for three straight months, the Business Conditions Index, which ranges between 0 and 100, tumbled to 46.7 from February's 52.8.

"According to Creighton's March survey of regional manufacturing supply managers, covid-19 had a smaller impact on the manufacturing sector than other areas of the economy more directly tied to the consumer. I expect negative impacts for manufacturers to worsen in the next month since almost two-thirds of supply managers reported that the coronavirus produced shipping problems to and from vendors," said Ernie Goss, PhD, director of Creighton University's Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics in the Heider College of Business.

Additionally, Goss said, "Creighton's March survey showed that eight of 10 supply managers reported that the coronavirus had caused the cancellation of business meetings, and 54.3% indicated that the virus had produced worker absences for the month."

Several supply managers reported that the coronavirus had produced shipping delays which resulted in inventory depletions.

Employment: The March employment index slumped to 34.7 from February's already weak 46.4. One supply manager reported, "Recently, I laid off 10% of workforce in anticipation of further downturns."

"Last Thursday, the U.S. Department of Labor reported the number of initial claims for unemployment insurance for the nine-state region rose to 272,540 from 16,628 the week before. This represents more than a 16-fold increase in initial claims compared to a lower 11-fold increase for the rest of the nation," said Goss.

Wholesale Prices: The wholesale inflation gauge for the month indicated only modest wholesale inflationary pressures with a wholesale price index of 55.2, down from 61.3 in February.

Confidence: Looking ahead six months, economic optimism, as captured by the March Business Confidence Index, plunged to a record low 14.5 from February's 51.4 and January's 58.8.

Said one supply manager, "My answers (responses) are just a snapshot in time and might change tomorrow." "The emergence of the coronavirus swamped the positive confidence impact of the recent passage of the U.S. Canada, Mexico trade agreement (USMCA) and Phase 1 of the trade agreement with China," said Goss.

Inventories: The regional inventory index, reflecting levels raw materials and supplies, increased to 50.0 up from last month's 48.7.

Trade: The regional trade numbers were very negative for the month with new export orders tumbling to 34.7 from February's 58.0. "On the other hand, the evolving coronavirus reduced international buying by supply mangers as the import index fell to 32.7 from 40.4 in February," reported Goss.

Approximately 55.3% said that the coronavirus had pushed their firm to switch to, cease, or reduce, international buying. More than one in three, or 34.3%, of supply managers indicated that the virus has caused their firm to switch some to domestic suppliers for some of their inputs formerly purchased abroad.

Other survey components: Other components of the March Business Conditions Index were new orders at 40.0, down from February's 62.9; the production or sales index sank to 37.8 from February's 53.7; and speed of deliveries of raw materials and supplies index at 68.4 rose from last month's 52.5 reflecting slower deliveries.

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.

The forecasting group's 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 Business Conditions 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 since 1931 by the Institute for Supply Management (ISM), formerly the National Association of Purchasing Management. The Mid-America report is produced independently of the national ISM.

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