OKLAHOMA CITY – The Mid-America Business Conditions Index climbed to 69.6 in February, its highest level since October and second-highest since April 2004, but is still about 3.5% below pre-COVID levels. And inflation has begun to appear in the construction industry and at the fuel pump.
Oklahoma’s economy continued to grow last month, but its business conditions index of 67.1 ranked sixth in the nine-state region. Arkansas led the pack, with an index of 79.8; Missouri was seventh, at 64.2; Kansas was ninth, at 61.6.
Numbers above 50 on the 0–100 scale indicate economic growth. The regional index has been in growth territory for nine consecutive months after falling to its lowest level in 11 years last April, records show.
The index is prepared by Dr. Ernie Goss, director of the Economic Forecasting Group at Creighton University in Omaha, Neb.
The regional index last month was in a range indicating “very strong” growth, Goss said.
Creighton’s regional manufacturing activity gauge is surging, restrained only by supply and labor constraints, he said. From the February survey, eight of ten manufacturing supply managers reported that bottlenecks in receiving raw materials and supplies from vendors was curtailing what would be even stronger growth.
“Since bottoming out in April, the region has regained almost one-half of the manufacturing jobs lost to COVID-19,” Goss said. “Even so, the regional manufacturing level is currently down by approximately 50,000 jobs, or 3.5%. Creighton’s monthly survey results indicate the region is adding jobs and economic activity at a healthy pace, and that growth will remain healthy for the first half of 2021,” Goss predicted.
Nationwide, manufacturing expanded in February at the fastest pace in three years with the arrival of a surge in new orders, the Associated Press announced.
The Institute for Supply Management reported March 1 that its gauge of manufacturing activity rose to a reading of 60.8% last month, 2.1 percentage-points above the January level of 58.7%, the AP said.
It was the strongest performance since February 2018, records reflect. Any reading above 50 indicates expansion in the manufacturing sector. The 60.8% reading last month matched a similar reading in February 2018 and the level in those months was the highest since a reading of 61.4% in May 2004.
INFLATION UP
The wholesale inflation gauge for February soared to 95.2, a record high for the region and up from January’s 10-year high of 91.1, Goss said.
A supply manager reported, “I purchase a lot of steel components and the increases are ridiculous. Steel availability is tight. I see hyperinflation coming.”
“At the wholesale level, Creighton’s survey is tracking higher and higher inflationary pressures,” Goss said.
Metal products and lumber, for example, are experiencing significant upward pressures in prices. Over the last six months metal prices have expanded by 11% and lumber products have advanced by 16%, according to U.S. Bureau of Labor Statistics data.
Marketplace, a non-profit news organization, reported on Feb. 19 that prices were “going up fairly steeply” for three specific commodities: gasoline, meat and lumber.
Low interest rates and pandemic-inspired home renovations and building have caused an unexpected surge in demand for building materials.
According to Bloomberg, the number of single-family houses being built in the U.S. soared last year, and by December reached the highest level since 2006.
A spokesman for the National Association of Home Builders said that the cost of lumber last April was $350 per thousand board feet, but prices today “are near $1,000,” or about $1 per board foot.
The foreman for an Edmond homebuilder told the Ledger that prices have increased for most of the commodities they use, including lumber, particleboard, sheathing such as OSB, shingles, glass and plastics. That, in turn, is reflected in the rising price of newly built houses.
The price of gasoline at the pump in Lawton is well above what it was a year ago or even a month ago. AAA calculated that the average price of gasoline in Lawton on March 4 was $2.451, compared to $2.029 one month earlier and $2.002 a year earlier.
“When the pandemic hit” a year ago, “energy demand plummeted and so did fuel prices,” Marketplace reported. “Now the economy is recovering and pump prices are rising.”
SUPPLY BOTTLENECKS
Shipping and transportation delays were named as the top issue accounting for supply bottlenecks.
“Thirty-three percent reported transportation issues. That’s shipping problems ... trucking issues, train issues. And so, that’s slowing,” Goss said. “Twenty-three percent reported suppliers’ cutbacks and shutdowns. In other words, having to switch suppliers.”
The regional employment index remained well above growth neutral for February, increasing from 57.2 in January to 65.6 in February. The nine-state region lost 1.5 million, or 10.9% of nonfarm jobs between the onset of COVID-19 and April of last year. However, since bottoming out last April, the region has regained 841,000 of the jobs lost, Goss said.
According to the U.S. Bureau of Labor Statistics, manufacturing wages for production workers in the region expanded by 3.6% since the onset of COVID-19 last March.
The Creighton Economic Forecasting Group has conducted the monthly survey of supply managers in nine states since 1994 to produce leading economic indicators of the Mid-America economy. States included in the survey are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.