Mountain States Economy Improving with Exports Leading the Way

April survey results at a glance:
* Business conditions index climbs above growth neutral for seventh straight month.
* Inflation gauge indicates significant inflation at wholesale level.
* Job gains reported for April.
* Export orders strengthened significantly over last three months.

Denver, CO – For a seventh straight month, the overall index for the Mountain States region, a leading economic indicator for the three-state area, moved above growth neutral 50.0.

The overall index, or Business Conditions Index, for April climbed to a healthy 58.8 from March’s 56.6 and February’s 58.6. The index is pointing to improving economic conditions for the three-state region composed of Colorado, Utah and Wyoming in the months ahead. The region’s manufacturing and value-added services sectors are experiencing very strong business activity.

The April employment index rose to 54.8 from 53.9 in March. Almost 27 percent of firms reported increases in jobs from March levels and more than 15 percent detailed reductions for the month. “While the financial turmoil in Europe is a clear risk to the recovery, manufacturing and value-added services sectors in the Mountain States region are experiencing strong business activity. This leading economic activity will continue to push overall economic growth for the three-state region higher through the third quarter of 2010. Government data show that regional employment was virtually flat for the first quarter of 2010. I expect job additions for the second quarter of 2010 to be positive but still below what is normal for an economy in recovery,” 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).

Rebounding prices have accompanied the regional economic improvements. The prices-paid index, which tracks the cost of raw materials and supplies, advanced to 72.9 from 70.7 in March. This is the tenth time in the past eleven months that the regional inflation gauge has climbed above growth neutral.

“While we have yet to experience rising inflationary pressures at the consumer level, record-low interest rates from the Federal Reserve, combined with record federal government spending deficit spending, are creating price bubbles in various commodities and will ultimately contribute to inflationary pressures at the consumer level – above the Fed’s goal of 1.75 percent to 2 percent. The Federal Reserve cannot continue to ignore this upward pressure on prices at the producer level. Recent Presidential appointments to the Federal Reserve Board are on the side of keeping rates low. Thus, while I think the Fed should raise rates soon, I do not expect a rate hike before the fourth quarter of this year,” said Goss.

Looking ahead six months, economic optimism, captured by the April confidence index, climbed to 63.8 from March’s 60.3. “Even though employers face too much uncertainty to more aggressively hire, record low interest rates, a stabilizing job market and recent declines in the nation’s unemployment rate are supporting economic optimism of supply managers in the Mountain States region,” said Goss.

Trade numbers improved significantly for April as new export orders advanced to 62.0 from 57.3 in March and 54.0 in February. April imports expanded to 53.0 from March’s 52.2. “Even as the Euro has weakened against the dollar, the dollar has depreciated in value by 7 percent against the currency of all trading partners over the past year. This decline in value has made both manufactured and agricultural goods from the U.S. more competitively priced abroad,” said Goss.

As another measure of economic confidence, supply managers in the three-state region added to inventories of raw materials and supplies for the month. The April inventory index grew to 57.2 from March’s 56.1. “This is the fifth straight month that we have recorded inventory restocking after more than one year of inventory reductions,” said Goss.

Other components of the April Business Conditions Index were new orders at 61.9, up from 58.6 in March; production or sales at 60.2, up from 59.6; and delivery lead time at 59.6, up from 54.7.

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 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 a seventh straight month, the state’s leading economic indicator rose above 50.0. The April index, based upon a survey of supply managers in the state, soared to 73.5 from March’s 57.0 and February’s 58.8. Components of the overall index for April were new orders at 79.1, production or sales at 80.6, delivery lead time at 53.6, inventories at 77.2, and employment at 77.1. “Economic uncertainty continues to restrain job growth among durable and non-durable manufacturers and mining firms in the state. Job additions for the state continue to be well below normal gains coming out of a recession. I expect modest job gains for the second quarter with flat unemployment rates,” 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 advanced to 58.9 from March’s 55.9 and February’s 55.8. Components of the overall index for April were new orders at 62.6, production or sales at 63.1, delivery lead time at 58.4, inventories at 58.3, and employment at 51.9. “Manufacturing firms have yet to increase hiring to any great extent. On the other hand, value added services companies are adding to their payrolls in the state,” said Goss.

Wyoming: The state’s leading economic indicator from a survey of supply managers in the state climbed above growth for a sixth straight month. The Wyoming Business Conditions Index for April increased to 58.7 from March’s 57.5. Supported by NAPM-Western Wyoming (http://www.ism.ws/sites/westwyoming/index.htm), surveys over the past several months indicate that the state’s economy is on the road to recovery. Components of the overall index for April were new orders at 58.5, production or sales at 49.0, delivery lead time at 60.5, inventories at 58.5, and employment at 67.3. “Our survey results over the past several months indicate that the state economy has turned the corner with manufacturers adding to payrolls and mining firms ceasing job cuts,” said Goss.