Regional manufacturers are optimistic about the economy over the next six months despite concerns over rising raw material prices and the effect of the new federal health care law.
A survey released Thursday by Creighton University showed a surge in business confidence starting off 2014. Its business confidence index, which looks six months ahead, soared to 66.5 in December from 57.2 in November. Any reading above 50 is considered positive.
Ernie Goss, director of the Omaha university’s economic forecasting group, said “the resolution of the federal budget impasse and improvements in the nation’s housing sector” gave supply managers’ optimism a boost.
But when asked to identify the biggest challenge to growth prospects for their company or industry this year, more than a third cited escalating prices for materials. Next, according to more than 20 percent of the respondents, were higher costs and uncertainties surrounding implementation of the Affordable Care Act. The third biggest potential hurdle this year for regional factories is rising regulatory costs, the survey said.
The report also said the monthly Mid-America Business Conditions Index climbed in December for the second consecutive month, with a reading of 53.2 “tepid,” but better than the 51.2 recorded in November. The index ranges between 0 and 100, with any reading over 50 indicating a growing economy over the next three to six months.
The index measures new orders, production, employment, inventories and delivery lead time for manufacturers in Kansas, Missouri, Nebraska, Arkansas, Iowa, Minnesota, Oklahoma, North Dakota and South Dakota.
Regional manufacturers said the job market weakened in December, particularly among businesses tied to agriculture. On the other hand, job growth for trucking and rail companies remained strong, the survey said.
Also Thursday, the Institute for Supply Management, a trade group of purchasing managers, said its national index of manufacturing activity slipped to 57 from 57.3 in November. But that’s still the second-highest reading in the past 2½ years.
A measure of new orders rose to its highest since April 2010. And a gauge of hiring increased to its highest level since June 2011. Production and a measure of manufacturers’ stockpiles fell.
“It is clear that growth remained strong at the end of last year, and this should continue into 2014,” said Paul Dales, an economist at Capital Economics.