Mountain States Leading Economic Indicator Advances; New Export Orders Strong for November

November survey results at a glance:
· Leading economic indicator slips again pointing to slow but positive growth in the months ahead.
· Supply managers expect producer prices to grow by an annualized rate of 6.8 percent in the months ahead.
· Business confidence remains strong.

Denver, CO – For the fourteenth 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. According to surveys of supply managers over the past several months, including November’s, the region will experience positive, but modest economic growth in the months ahead.

Overall Index: The overall index, or Business Conditions Index, for November climbed to 56.0 from 55.4 in October. “Even though the leading economic indicator has been above growth neutral for some time, growth has been, and will continue to be modest. While our survey is dominated by manufacturers, it is the value added services producers that are reporting much improved business conditions. Both durable and non-durable goods producers in the region continue to expand production with little or no growth in hiring. I do expect a turnaround in manufacturing hiring over the course of the next several months,” 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 November employment index slipped to 57.2 from October’s 57.9 and from September’s 60.2. “Sub-par job growth in the region has matched that of the nation for 2010. Companies in the region have expanded their production while adding few jobs as they get more and more output from their current workforce. Furthermore, companies that have added significant new workers have relied on temporary workers for the increase,” said Goss.

Wholesale Prices: The regional price gauge expanded to an inflationary 67.8 from 66.7 in October. The prices-paid index, which tracks the cost of raw materials and supplies, has now moved above growth neutral in seventeen of the past eighteen months. “This month we asked supply managers how much they expect prices on products they buy to change in the next six months. On an annualized basis, supply managers anticipate a 6.8 percent increase in prices. This is up from 4.8 percent in July of this year when we asked this same question. I expect this increase at the producer level to bolster consumer prices well above the Federal Reserve’s target rate of 2.0 percent sometime in 2011,” said Goss.

Business Confidence: Looking ahead six months, economic optimism, captured by the November confidence index, advanced to 62.9 from October’s 62.5 and September’s 59.8. “While the overall U.S. economy remains weak, as gauged by unemployment rates, individual firms in the Mountain States region are experiencing solid improvements in business conditions. This is translating into a strong economic outlook,” reported Goss.

Inventories: Supply managers in the three-state region added to inventories of raw materials and supplies for the month, but at a much slower pace with a November index of 51.1 from October’s 50.5. “This is the twelfth straight month that we have recorded inventory restocking after more than one year of inventory reductions during the economic downturn,” said Goss.

Trade: Trade numbers were healthy for November. The new export orders index slipped to a still healthy 60.1 from 60.8 in October. Imports for November dipped to 56.3 from October’s 65.7. Approximately 23 percent of supply managers report increased buying from abroad over the past three months, while only 5.6 percent indicated that their international buying had declined over this same time period. “Strength in the region’s energy sector is spilling over into the rest of the area economy. Unless the debt problems of Portugal, Ireland and Spain spill over into the rest of the Euro Zone, I expect strong energy income to continue to push the Mountain States economy forward. However, any economic contagion that strikes Germany and France would weaken the Euro, strengthen the dollar, and negatively impact U.S. energy commodity prices and Mountain States growth,” stated Goss.

Other Components: Other components of the November Business Conditions Index were new orders at 59.0, up from 56.0 in October; production or sales at 54.7, down slightly from 55.6; and delivery lead time at 57.8, up from 56.9 in October.

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, bounced higher for November. The November overall index, termed the Business Conditions Index, increased to 53.7 from 53.3 in October. Components of the overall index for November were new orders at 63.3, production or sales at 46.7, delivery lead time at 50.7, inventories at 42.8, and employment at 64.8. “Firms in the state linked to the energy sector continue to experience very healthy growth offsetting somewhat weaker conditions among the state’s durable goods producers. Many of the added workers over the past several months are temporary. I expect more and more permanent hires in the months ahead,” 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 climbed to 56.1 from 56.0 in October. Components of the overall index for November were new orders at 56.4, production or sales at 56.5, delivery lead time at 59.9, inventories at 54.3, and employment at 53.8. “Durable goods manufacturers in the state outperformed non-durable goods producers over the past several months. Firms with linkages to the energy sector continue to experience healthy growth and growth prospects,” said Goss.

Wyoming: The state’s leading economic indicator from a survey of supply managers in the state climbed above growth neutral for the thirteenth straight month. The Wyoming Business Conditions Index for November advanced to 54.4 from October’s 52.2. 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 three to six months. Components of the overall index for November were new orders at 66.7, production or sales at 49.9, delivery lead time at 46.9, inventories at 51.1, and employment at 63.1. “Expansions among firms with ties to the state’s large energy sector continue to experience very healthy growth. Wyoming’s durable goods producers also detailed solid business conditions for the month,” said Goss.