Mountain States Leading Indicator Advances for February:
Negative Sequestration Impacts Expected
February survey results at a glance:
· The region’s leading economic indicator continues to point to healthy growth for the next 3 to 6 months.
· Approximately 37.5 percent expect sequestration to result in a reduction in unit sales for their company.
· Business confidence slumped below 50.0 for the month.
· Approximately 60 percent of firms have expanded their sustainable buying programs over the past two years.
For Immediate Release: March 1, 2013
Denver, CO – For the 40th 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 February index from the survey of supply managers continues to exceed the national index and the gap is growing (www.ism.ws).
Overall Index: The overall index, or Business Conditions Index, which ranges between 0 and 100, climbed to 54.9 from 54.8 in January.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.
“Firms with ties to agriculture and energy continue to expand at a solid pace. Additionally, companies dependent on international sales experienced solid growth for the month,” 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).
Employment: The employment index rose above growth neutral for the month. The hiring gauge increased to 54.2 from 53.6 in January.“As housing has rebounded in the region, so has employment tied to this important industry. Additionally firms tied to agriculture and energy are adding jobs at a healthy pace,” said Goss.
Wholesale Prices: The prices-paid index, which tracks the cost of raw materials and supplies, rose to 71.8 from 69.8 in January. “The Federal Reserve Open Market Committee, which sets U.S. interest rate policy remains committed to their current aggressive ‘cheap’ money policy. While it has not sparked any significant inflationary pressures for U.S. consumers, this policy is boosting our wholesale inflation gauge and is pushing U.S. asset prices up at a pace that is causing disruptions in certain sectors of the economy such as energy and agriculture,” said Goss.
Business Confidence: Looking ahead six months, economic optimism, as captured by the business confidence index, slumped to 49.8 from 52.1 in January. “This month we asked supply managers how the upcoming sequestration would affect their company’s sales. Approximately 37.5 percent expect the cut in federal spending to result in a reduction in unit sales for their company. It is clear that this had a negative impact on supply manager’s economic outlook this month,” said Goss.
Inventories: Supply managers in the three-state region added to inventories of raw materials and supplies for the month. The index slipped to 59.5 from January’s 63.1. “We have recorded inventory growth for 39 straight months. Healthy inventory growth normally signals that supply managers expect production expansions in the months ahead and is consistent with economic growth and expanding business confidence,” said Goss.
Companies in the region continue to expand “sustainable” procurement policies. This month, 60 percent of firms indicated that they had expanded sustainable purchases of raw materials and supplies over the past two years. On the other hand, 30 percent reported no change and 10 reported a reduction in sustainable buying.
Trade: The new export order reading for the Mountain States region declined to 53.3 from 56.6 in January. The import reading for the month sank to 54.8 from January’s solid 55.4. “Healthy growth among Mountain States’ firms pushed buying from abroad to February’s healthy level. Even though the export reading declined for the month, new orders from abroad continue to be a source of regional growth,” said Goss
Other Components: Other components used to calculate the overall index for February were new orders at 54.1, up from January’s 49.9; production or sales at 53.1, down from 56.0; and delivery lead time at 53.2, down from January’s 54.8.
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, moved above growth neutral for February. The overall index, termed the Business Conditions Index, climbed to 58.9 from January’s 54.4. Components of the Business Conditions Index for February were new orders at 60.0, production or sales at 49.6, delivery lead time at 68.4, inventories at 56.3, and employment at 58.9. “The state’s housing sector is now stimulating overall growth in the state. Additionally, both durable and non-durable manufacturing firms experienced healthy growth for the month,” 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 for February declined to 54.7 from January’s 57.3. Components of the Business Conditions Index for February were new orders at 55.1, production or sales at 55.1, delivery lead time at 53.1, inventories at 56.5, and employment at 53.4. “Durable goods manufacturers including metal producers and electronic component manufacturers experienced healthy expansions for February,” said Goss.
Wyoming: The state’s leading economic indicator from a survey of supply managers in the state has now climbed above growth neutral 50.0 for 40 straight months. The index, termed the Business Conditions Index, climbed to 59.4 from January’s 53.8. Supported by NAPM-Western Wyoming (http://www.ism.ws/sites/westwyoming/index.htm), surveys over the past several months point to positive economic growth in the state economy for the first half of 2013. Components of the overall index for February were new orders at 47.8, production or sales at 55.2, delivery lead time at 48.8, inventories at 81.3, and employment at 63.9. “Growth among non-durable goods manufacturers more than offset economic pullbacks for durable goods producers for the month,” said Goss.
March results will be released on April 1, the first business day in April.