August survey results at a glance
• Leading economic indicator declines to lowest level since January but remains in healthy range.
• More than one-third of supply managers expect a recession in 2011.
• Inflation, not deflation, is the major concern.
• Growth push from inventory buildups is waning.
In a recent survey of supply managers, when asked what their expectations were for the U.S. economy for 2011, one-third, or 35 percent, said it was likely the economy will move back into recession territory.
That came out of the August Business Conditions Index, a monthly survey of supply managers across a nine-state area, including Kansas.
The index for the region dipped to 55.8, down from July’s 60.8 and June’s 62.5. Surveys conducted during the past several months indicate economic expansion will continue to weaken, and there is rising potential for a double-dip recession.
Creighton University economics professor Ernie Goss said the index rating in August still is above “growth-neutral” (50) and this was the ninth consecutive month the index has been above that level.
“These results are very similar to what we recorded coming out of the 2001 recession,” Goss said. “Of course, the big difference is that tax cuts were passed in 2001 and 2003. At this point in time, Americans are staring at a significant tax increase on Jan. 1, 2011. Even so, our surveys are pointing to much slower growth at this time, not a double-dip recession.”
In Kansas, the leading economic indicator for Kansas from a survey of supply managers increased for the first time since May. The August Business Conditions Index climbed to 53.4 from 49.3 in July and 51.1 in June. Components of the overall index for August were new orders at 59.5, production, or sales, at 55.8, delivery lead time at 54.5, employment at 51.6, and inventories at 45.7.
“Food producers in Kansas report experienced healthy business conditions for the month. On the other hand, durable goods manufacturers and telecommunications firms have experienced pullbacks in growth prospects,” Goss said.
The report also showed that, for the eighth straight month, the regional employment index climbed above growth neutral. The August job reading dipped to 55.2 from 58.8 in July.
“The Mid-America region is showing a lot more strength than the national economy. Over the past several months, for example, the region has been adding jobs at a very healthy pace while U.S. job growth has been nil,” Goss said. “With a weak dollar supporting agriculture and energy commodity prices, I expect this gap between the regional and national economies to remain and potentially widen.”
Looking ahead six months, economic optimism, captured by the August business confidence index, dipped to 52.4 from 54.8 in July and 59.4 in June.
“This is the lowest confidence index that we have recorded since January 2009 and the fourth straight month that the confidence has declined,” Goss said.
Trade numbers for August mirror the slow growth economy. The August new export orders advanced slightly to 51.9 from 51.0 in July, well below from June’s 60.9. Supply managers reported a pullback in imports with an August index of 47.6, down from 54.0 in July.
