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Iowa economy slows behind ongoing labor shortages, continued concerns with supply chain, inflation


Supply chain disruptions and labor shortages continue to be top concerns for Iowa’s economy, according to a monthly survey of supply chain managers.

Creighton University’s MidAmerican Business Conditions Index showed that Iowa’s index for August fell to 55.7, from 57.4 in July.

The index, which covers a nine-state region, ranges from 0 to 100, with a score of 50 indicating neutral growth for the next six months.

Iowa’s score mirrored the overall score for the region, which dropped to 55.5, down from 59.8 in July.

“Creighton’s monthly survey results indicate the region continues to add manufacturing activity at a solid pace — with significant but declining inflationary pressures,” said Ernie Goss, director of the university’s Economic Forecasting Group. “Supply chain disruptions eased further in August, according to supply managers.”

Despite supply chain issues easing, 58.6% of supply chain managers who participated in the survey listed supply chain disruptions as their chief challenge to growth for the remainder of 2022.

Labor shortages were listed as a top challenge by 24.1% of supply managers, followed by higher inflation (10.4%) and elevated interest rates (6.9%).

Components of the overall August index in Iowa also increased, with the exception of employment, which declined from the prior month. The index for new orders was 57.3, production or sales was 56.1, delivery lead time was 58.8, and the inventories index was 57.2. The employment index fell below growth-neutral to 49, down from 55.1 in July.

For the region, the employment index also fell, from 58.7 in July to 51.8.

The wholesale price index declined to 76, down from 82.2 in July. While encouraging, Goss forecast that the Federal Reserve would continue to increase interest rates.

“This is an encouraging reading since it is the lowest wholesale inflation gauge since September 2020,” Goss said. “As oil prices have stabilized at a lower level, so has inflation. Even so, I expect the Federal Reserve to announce an interest rate hike of 75 basis points (0.75%) at its Sept. 21 meeting to continue to combat inflation.”

According to the U.S. Bureau of Labor Statistics, commodity prices are up approximately 17.2% over the last 12 months with farm products advancing by 26.8%, metal products expanding by 7.5% and fuels soaring by 40.3% during this same time period.

The inventory index rose slightly in August, while the trade index was mixed. The index score for exports fell significantly to below growth-neutral because of supply chain bottlenecks and a strong dollar, the report showed. However, the strength of the dollar pushed the import index higher to above growth-neutral territory.

The report also showed that the confidence index edged up slightly in August, but remained well below growth-neutral.

“Confidence indices for 2022, all below growth-neutral, are the worst recorded since the 2008-09 recession,” Goss said.

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