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Manufacturing Economy Growing, While Soaring Inflation Signals Potential for Economic Risks


Lukas Partners supports Creighton University Economics professor Ernie Goss, Ph.D, to create and distribute a monthly video that summarizes his Mid-America Business Conditions Index, a survey of supply managers. This is a leading economic indicator for the nine-state Midwestern region that stretches from Minnesota to Arkansas.


You can view Dr. Goss’ February recap video at http://bit.ly/MidAmericaBCIFeb2021YouTube.


In his monthly video recap, Dr. Goss said February’s Mid-America Business Conditions Index was the highest it has been since October 2020 and the second highest it has been since April 2004. However, Dr. Goss said economic risks are rising due to higher inflationary pressures.


An economic rebound is expected in the second half of 2021, but interest rates will be higher. The inflation gauge soared to 95.2, up from 91.1 in January. Inflationary pressures are building daily, and inflation is expected to increase due to President Biden’s stimulus package.


The manufacturing economy is growing briskly but is being impacted by supply bottlenecks that are preventing products from getting to manufacturers. Supply bottlenecks, inflation and the ability to find and hire qualified workers caused a slight drop in Business Confidence in February.


Additional February 2021 insights are:

-Regional employment is down 4.8% from pre-COVID-19 levels, but more jobs are being added.

-33% of manufacturers reported that supplies are impacted by transportation and shipping issues.

-There are fewer first-time claims for unemployment insurance.

-Trade is strong due to the decreasing value of the U.S. dollar, which has resulted in more competitive prices abroad.

-Stocks are weaker due to increasing long-term interest rates. Investors are looking for alternatives to stocks, such as Bitcoin.

-The economy still needs to see 3 to 4% growth to get back to pre-COVID-19 levels, which could be accomplished with a successful rollout of the COVID-19 vaccine.

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