Mountain States Leading Economic Indicator Slips But No Return to Recession

September survey results at a glance:

· Leading economic indicator slips again pointing to slower growth in the months ahead.
· More than one of four, or 26.7 percent, of firms expect holiday sales to grow by more than 5 percent from last year.
· One in ten, or 10.0 percent, of firms anticipate holiday sales to decline by more than 5 percent from last year.
· Price gauge continues to point to inflation, not deflation.

Denver, CO – For a twelfth straight month, the overall index for the Mountain States region, a leading economic indicator for the three-state area of Colorado, Utah, and Wyoming, moved above growth neutral 50.0. According to the September survey of supply managers in the Mountain States, the region will experience economic growth in the months ahead with little likelihood of a double dip recession.

Overall Index: The overall index, or Business Conditions Index, for September slipped to 54.0 from 54.7 for August and from July’s much stronger 58.6. “While growth will likely be somewhat weaker in the months ahead, I expect it to remain positive for most of the region, though Colorado’s expansion will be much softer than Utah’s and Wyoming’s,” said 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 September employment index climbed to 60.2 from 57.6 for August. For September, 28.7 percent of firms reported increases in employment as 8.4 percent detailed pullbacks in September employment levels. “Over the course of the official national recession, the region lost more than 197,000 jobs. Since the recession officially ended in June 2009, the region has lost an additional 32,500 jobs. In terms of jobs, I do not expect the region to be back to pre-recession levels until the end of 2012,” said Goss.

Wholesale Prices: The regional price gauge expanded to an inflationary 66.6 from 65.0 in August and 65.4 in July. The prices-paid index, which tracks the cost of raw materials and supplies, has now moved above growth neutral for fifteen of the past sixteen months. “Based on our survey results, as well as other surveys of supply managers, I still think fears of deflation are way overblown. Once the economy gets fully back on track, inflation and price bubbles will be the problem, not deflation,” said Goss.

Business Confidence: Looking ahead six months, economic optimism, captured by the September confidence index, advanced to 59.8 from 55.3 in August but down from 62.6 in July. “I was surprised by the relatively strong confidence numbers given the backdrop of negative reports for the national economy,” reported Goss.

Inventories: As another measure of somewhat weaker economic confidence, supply managers in the three-state region added to inventories of raw materials and supplies for the month, but at a much slower pace. The September inventory index slumped to 51.0 from August’s 55.3. “This is the tenth straight month that we have recorded inventory restocking after more than one year of inventory reductions. We cannot continue to count on inventory restocking to fuel growth. Upturns in consumer buying, business capital spending and exports are essential for sustained regional growth,” said Goss.

Trade: Trade numbers improved for September. The new export orders index rose to a tepid 52.1 from 51.5 in August. Imports for September inched higher to 55.1 from 55.0 in August. “Recent weakness in the dollar, making U.S. goods more competitive abroad, should support improvements in exports in the months ahead,” stated Goss.

Other Components: Other components of the September Business Conditions Index were new orders at 51.6, down from 51.7 in August; production or sales at 52.8, down from 54.0; and delivery lead time at 54.6, down from 54.9 in August.

Holiday buying: This month supply managers were asked about their expectations for the holiday buying season this year compared to last for their firm. More than one of four, or 26.7 percent, expect holiday sales to grow by more than 5 percent, while one in ten, or 10.0 percent, anticipate holiday sales declining by more than 5 percent. The remainder expects sales to range from no change (33.3 percent), to increase by one to four percent (20.0 percent), or to decline by one to four percent (10.0 percent).

Sustainability buying: This month supply managers were asked whether they were experiencing changes in pressures to buy to support sustainability. More than four of ten, or 42 percent, have experienced increasing pressures to support sustainability via their purchasing patterns, while only 3 percent report a reduction in such pressure. The remaining 55 percent report no change in pressure to buy to support sustainability.

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: For the twelfth straight month, the state’s leading economic indicator rose above 50.0. However, economic growth for Colorado in the next three to six month is expected to be anemic and significantly lower than for the region. The September index, based upon a survey of supply managers in the state, slumped to 50.6 from 53.0 in August and 56.2 in July. Components of the overall index for September were new orders at 49.3, production or sales at 48.7, delivery lead time at 52.9, inventories at 51.0, and employment at 51.1. “During the official national recession, Colorado lost almost 114,000 jobs. Since the recession officially ended in June 2009, the state has lost an additional 42,000. In terms of jobs, I do not expect the state to be back to pre-recession levels until the end of 2012,” said Goss.

Utah: The state’s Business Conditions Index, a leading economic indicator, once again climbed above growth neutral 50.0. Based on the monthly survey of the membership of NAPM -Utah (www.napmutah.org), the overall index dipped to 54.3 from 54.8 in August and 58.5 in July. Components of the overall index for September were new orders at 53.6, production or sales at 56.5, delivery lead time at 54.1, inventories at 50.3, and employment at 57.1. “During the official national recession, Utah lost more than 76,000 jobs. Since the recession officially ended in June 2009, the state has added almost 12,000 jobs. In terms of jobs, I expect the state to be back to pre-recession levels before the end of the second quarter of 2012,” said Goss.

Wyoming: The state’s leading economic indicator from a survey of supply managers in the state climbed above growth neutral for a eleventh straight month. The Wyoming Business Conditions Index for September declined to 54.3 from 57.5 in August and 57.6 in July. Supported by NAPM-Western Wyoming (http://www.ism.ws/sites/westwyoming/index.htm), surveys over the past several months indicate point to an expanding state economy for the next three to six months. Components of the overall index for September were new orders at 49.9, production or sales at 49.6, delivery lead time at 71.0, inventories at 54.3, and employment at 69.1. “During the official national recession, Wyoming lost more than 7,000 jobs. Since the recession officially ended in June 2009, the state has lost an additional 2,300. In terms of jobs, I expect the state to be back to pre-recession levels in the first half of 2012,” said Goss.