DENVER - For the 24th 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 26 consecutive months (www.ism.ws) but has remained lower than the regional reading. The gap between the results of the two surveys has widened, primarily as a result of Mountain States' growth tied to the region's large energy sector, exports and agriculture.
Overall Index: The overall index, or Business Conditions Index, which ranges between 0 and 100, sank to a healthy 57.3 from 57.8 in September. An index of 50.0 is considered growth neutral. The overall index, or 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 by the national Institute for Supply Management.
"Manufacturing not linked to energy or agriculture experienced much slower growth for the month. Even so, the Mountain States regional economy continues to expand with little evidence of an impending recession. Businesses with close ties to agriculture, energy and exports continue to expand and add jobs at a healthy pace," 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).
This month we asked supply managers if they expected the U.S. economy to move back into recessionary territory for 2012. Approximately one-third think a recession is likely while 19 percent judge a recession as unlikely. The remaining 48 percent assess a 50-50 chance of an economic recession in 2012. Almost one year ago when we asked this same question, only 15 percent expected a recession for 2011 while 34 percent thought a recession was unlikely. "Clearly over the past year, recession expectations have risen among supply managers even as the regional economy expands," said Goss.
"While none of the survey participants are in the retail sector, they do depend on holiday buying to support their businesses. This month we asked the expected change in holiday related business activity this year compared to last. Overall only a 0.6 percent increase is expected. This compares to 2010's expected growth of 2.1 percent in holiday linked activity," reported Goss.
Employment: The October employment index slipped to 53.9 from 56.4 in September. "The region continues to add jobs at roughly four times that of the rest of the nation. The unemployment rate for the region has dipped by two-tenths of one percentage point over the past three months. I expect a similar decline in the next three months," said Goss.
Wholesale Prices: The prices-paid index, which tracks the cost of raw materials and supplies, dipped to an inflationary 70.5 from September's 71.2. "Recent strength in the U.S. dollar has cooled inflationary pressures over the past several months. Lower inflation in the pipeline, particularly at the national level, will give the Federal Reserve more flexibility to further stimulate the economy with another QE3. I expect a launch announcement at their December 13 meeting with the November 1-2 meeting used to lay the foundation for the December unveiling," said Goss.
Inventories: Supply managers in the three-state region added to inventories of raw materials and supplies for the month with a reading of 58.9, up from September's 57.3. "This is the 23rd straight month that we have recorded inventory growth, and it remains a growth factor," said Goss.
Business Confidence: Looking ahead six months, economic optimism, captured by the confidence index, advanced to 52.3 from 42.0 in September. "Inventory additions along with a sharp upturn in business confidence are contrary what we are seeing at the national level," said Goss.
Trade: The regional export orders index slumped to a still healthy 59.4 from September's 73.4. The region's import reading dipped to 55.4 from 56.3 in September. "A somewhat stronger U.S. dollar pushed growth in export orders lower," reported Goss.
Other Components: Other components of the October Business Conditions Index were new orders at 60.3, down slight from 60.5 in September; production or sales at 57.9, down from 60.7; and delivery lead time at 55.6, down from 56.7 in September.
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, advanced for October. The overall index, termed the Business Conditions Index, for October expanded to 53.3 from September's 51.9. Components of the Business Conditions Index for October were new orders at 48.5, production or sales at 56.6, delivery lead time at 60.0, inventories at 46.7, and employment at 54.4. "Both durable and non-durable manufacturers reported very modest growth with metal product manufacturers detailing pullbacks as computer and electronic component manufacturers experience improving growth. As in past months, energy and supporting industries reported very strong growth for October," 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 advanced to a healthy 56.8 from 55.4 in September. Components of the Business Conditions Index for October were new orders at 58.3, production or sales at 61.3, delivery lead time at 54.4, inventories at 57.8, and employment at 52.0. "Durable and non-durable goods producers reported healthy growth for the month. Computer and electronic component manufacturers and metal products producers reported healthy expansions for the month. Energy and energy support firms reported very strong growth for the month," said Goss.
Wyoming: The state's leading economic indicator from a survey of supply managers in the state climbed above growth neutral for the 24th straight month. The index, termed the Business Conditions Index, sank to a strong 60.9 from 66.8 in September. Supported by NAPM-Western Wyoming (http://www.ism.ws/sites/westwyoming/index.htm), surveys over the past several months point to an expanding state economy for the next 3 to 6 months. Components of the overall index for October were new orders at 76.0, production or sales at 45.2, delivery lead time at 46.4, inventories at 71.6, and employment at 65.2. "Energy and energy support firms continue to report very robust growth. On the other hand, manufacturing not linked to energy experienced pullbacks for the month," said Goss.