Omaha, Nebraska — The monthly survey of supply managers in Iowa and eight other Midwestern states shows both the state and regional economies took big falls during July.
Creighton University economist Ernie Goss says it’s a warning sign for the economy in the months ahead, as the overall Business Conditions Index indicates a significant slowdown is looming in the Midwestern manufacturing sector.
The index is measured on a zero-to-100 scale, with 50 being growth neutral. The survey shows the Midwest economy dropped from 50.8 in June to 46.1 in July, while Iowa’s economy fell much further, from 55.4 in June to 46.0 in July. Despite some recent optimism about the US economy’s overall performance, the survey shows the region’s supply managers estimate there’s almost a 50-50 chance of a recession in the second half of this year. Goss expects what he’s calling “a rolling recession” to impact certain sectors of the economy, especially commercial real estate and manufacturing.
The overall index for the region was the lowest overall reading since the beginning of the pandemic in May of 2020, he says. Only about one in five supply managers reported job gains in July as it remains challenging to find and hire qualified workers due to low unemployment rates and what Goss calls “labor hoarding.”
The Creighton survey shows the impact of inflation is continuing to lessen. The July survey recorded its lowest inflation gauge reading since December of 2022. Still, Goss says the supply managers they surveyed expect wholesale prices to rise by nearly five-percent over the next 12 months.
Another key area to watch is the real estate market, which Goss says is “iffy.” While new home sales are growing dramatically, he says existing home sales are not good and prices are falling. According to data from the U.S. International Trade Association, Iowa exports expanded by 7.5% in the first five months of this year compared to last year, while the state’s leading export, machinery manufacturing, expanded by more than 34% from 2022 to 2023.
