The overall index for the Mountain States region, a leading economic indicator for the three-state area, once again sank below growth neutral. The index, based on a survey of supply managers in Colorado, Utah and Wyoming, points to a continuation of the economic recession for the region.
The overall index, or Business Conditions Index, improved to a still weak 41.4 from May's 38.9 and April's 37.8. An index of 50.0 is considered growth neutral, with recent readings, including that for June, pointing to negative growth, job losses, and rising unemployment rates in the months ahead for the region.
 The June employment index rose to a weak 40.9 from May's 39.2 and April’s 36.1. “Contrary to the nation, job losses have escalated in the region as the area's large mining and natural resources industry bled jobs at an elevated pace. Over the last three months, the region has lost jobs at a pace over 8.0 percent. I expect this rate of job loss to slow in the next quarter but remain negative,” said Goss.
For the first time since January, there was a downturn in the regional prices-paid index. The inflation gauge, which tracks the cost of raw materials and supplies, slumped to 42.9 from May's 52.6 and April’s 51.3.
"Despite the Federal Reserve (Fed) setting short-term interest rates at their lowest levels since the Fed was created in 1913, we are tracking no upward inflationary pressures in the region. The Fed interest rate setting committee, the FOMC, meets next on August 11 for two days. I expect no changes in the current funds rate of 0 percent to 0.25 percent at that meeting," said Goss.
Looking ahead six months, economic optimism, captured by the confidence index, climbed slightly, to a very strong 67.9 from May's 66.0 and April's 58.8. “Despite current weak economic conditions according to supply managers, the purchasers are optimistic about economic prospects six months out,” reported Goss.
Other components of the June Business Conditions Index were new orders at 41.4, up from 38.9 in May; production at 42.3, up from 36.9; and delivery lead time at 46.8, up from 41.8.
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.
Colorado’s leading economic indicator for June, based upon a survey of supply managers in the state, once again was below growth neutral 50.0. The June Business Index slumped to 42.0 from May's 44.0, but was higher than April’s 38.0. Components of the overall index for June were new orders at 40.9, production at 43.2, delivery lead time at 45.4, inventories at 38.6, and employment at 42.2.
“Over the past year, Colorado has lost more than 14,000 manufacturing jobs, with a large percentage of the losses among durable goods producers. Our survey indicates that these losses continued for June. According to government employment data, 12,000 Colorado workers left the workforce over the past three months. As these workers see the economy pick up, they will once again enter the workforce searching for a job and increasing the state's unemployment rate. I expect the state's unemployment rate to top out at 8.2 percent (seasonally adjusted) before the end of the fourth quarter of this year,” reported Goss.
“On a more positive note, readings over the past several months indicate that the region's leading economic indicator has bottomed out, with the region's Business Conditions Index likely to continue its upward trend in the months ahead. That is, I expect the regional negatives to get less negative in the months ahead as the Federal Reserve’s accommodative economic policy and federal deficit spending have short-term positive impacts.”
The Goss Institute conducts the monthly survey for Supply Management Institutes in the three states comprising the Mountain States region. For more information, visit their website. |