Mountain States Leading Economic Indicator Slides: Inflation Gauge Soars to Record Height

April survey results at a glance:

· Leading economic indicator slides to still healthy level.
· Inflation gauge climbs to highest level since 1994.
· Almost two-thirds of respondents report that suppliers are adding transportation surcharges to deal with escalating energy costs.
· Supply managers expect prices for products and services they buy to increase at an annualized pace of 9.3 percent over the next six months.

Denver, CO – For the eighteenth 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, durable goods producers continue to benefit from healthy growth in sales and new orders from abroad even as higher energy prices is cooling overall growth.

Overall Index: The overall index, or Business Conditions Index which ranges between 0 and 100, dipped to a healthy 58.6 from 61.2 in March. 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.

“We are beginning to see high energy prices cut into economic growth for some firms even as higher energy commodity prices improve the outlook for businesses linked to the energy sector and agriculture,” 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 April employment index slumped to 51.8 from March’s 55.6. “After many months of rising new orders, sales and productivity, firms in the region continue to expand hiring. However, the pace of that hiring slowed for March. The Federal Reserve’s weak dollar policy has bolstered commodity prices and economic prospects of firms selling internationally,” said Goss.

Wholesale Prices: The prices-paid index, which tracks the cost of raw materials and supplies, soared to 90.0, a record high, from March’s 86.9. “Higher commodity prices, especially for energy products pushed our inflation gauge to its highest level since we initiated the survey in 1994,” said Goss.

“We continue to record unacceptably high inflationary pressures at the wholesale level. Even though the Federal Reserve (Fed) indicated it would end its buying of long-term U.S. Treasury bonds, termed quantitative easing, this summer, I expect the Fed’s record low short term interest rates to continue to weaken the dollar and push inflation above the Fed’s comfort zone,” said Goss.

“This month we asked survey participants how their suppliers were dealing with higher energy prices. Approximately 24 percent indicated that their vendors had raised prices permanently, 8 percent reported temporary price increases and 64 percent indicated that supplying firms had added transportation surcharges. The remaining 4 percent reported other supplier reactions.”

“We also asked supply managers how much they expected prices they pay for products and services to increase over the next six months. Approximately 32 percent anticipate growth of more than six percent over the next half year. Overall, an annualized upturn over 9.3 percent is expected. This is up from 6.8 percent in November of last year when we asked the same question,” said Goss.

Business Confidence: Looking ahead six months, economic optimism, captured by the confidence index, advanced to 62.0 from 61.9 in March. “Despite significantly higher input prices, supply managers remain upbeat in their economic outlook,” reported Goss.

Inventories: Supply managers in the three-state region added to inventories of raw materials and supplies for the month at a brisk pace with a reading of 58.0 from 59.1 in March. “This is the seventeenth straight month that we have recorded inventory growth. As a result of rising economic confidence, firms in the region continue to expand inventories in anticipation of growing sales in 2011,” said Goss.

Trade: Boosted by a cheap dollar making U.S. goods more competitively priced abroad and by an expanding global economy, regional export orders advanced with an April reading of 63.4, up from March’s 62.6. The region’s import reading declined to 53.4 from 57.2 in March. “The Fed’s cheap dollar policy and a global economic expansion combined to boost sales and new orders from abroad,” said Goss.

Other Components: Other components of the April Business Conditions Index were new orders at 65.0, down from 67.6 in March; production or sales at 60.7 down from 67.2; and delivery lead time at 57.3, up from 56.3 in March.

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, dipped for April. The April overall index, termed the Business Conditions Index, slumped to 53.8 from March’s healthy 59.6. Components of the Business Conditions Index for April were new orders at 63.9, production or sales at 59.0, delivery lead time at 49.2, inventories at 45.2, and employment at 51.7. “Durable goods producers continue to report expanding business activity, especially that linked to international markets. We are beginning to see improving prospects for the state’s large computer and electronic component manufacturers. At the same time, non-durable goods detailed less robust economic activity for the month. Telecommunication firms have yet to begin hiring in the state,” reported 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 NAPM - Utah (www.napmutah.org), the overall index dipped to 56.9 from March’s 59.8. Components of the Business Conditions Index for April were new orders at 61.5, production or sales at 58.7, delivery lead time at 58.0, inventories at 56.0, and employment at 50.5. “Durable goods producers, especially computer and electronic component manufacturers, are experiencing very healthy growth. Non-durable goods producers linked to international markets reported solid improvements in April adding jobs with healthy new orders,” said Goss.

Wyoming: The state’s leading economic indicator from a survey of supply managers in the state climbed above growth neutral for the eighteenth straight month. The index, termed the Business Conditions Index, slipped to 67.5 from March’s 69.0. 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 first half of 2011. Components of the overall index for April were new orders at 78.0, production or sales at 71.6, delivery lead time at 57.9, inventories at 71.1, and employment at 59.1. “No other state in the U.S. has benefited more from the Fed’s cheap dollar policy than Wyoming . Stimulated by higher energy prices linked to a weak U.S. dollar, energy firms and manufacturers tied to international markets are experiencing healthy growth,” reported Goss.