Job losses and rising inflationary pressure push index down

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After rising above neutral growth during July, the overall index for the Mountain States region, and for Colorado, sank below 50 for August.  

The index, based on a survey of supply managers in Colorado, Utah and Wyoming, points to a wilting economic recovery.   

 The Business Conditions Index slipped from 51.5 during July to 47, but remained above June’s weak 41.4.  An index of 50 is considered neutral growth.

 The August employment index inched up from 43.5 to 46.  

“The region shed jobs at an annualized rate of roughly 3.5 percent over the past three months with more than 125,000 jobs lost for 2009,” said Ernie Goss, director of the Goss Institute for Economic Research. “Based on surveys over the past few months, I expect the pace of job losses to slow in the months ahead even as unemployment rates rise.”

The institute conducts the monthly survey for Supply Management Institutes in the Mountain States region (www.outlook-economic.org).

 “Even though the overall index was down for the month, the leading economic indicator has been trending upward over the past several months,” Goss said. “Comparing this recession to that of 2001, our surveys then and now indicate that the current economic recovery will be significantly weaker.”

For the fourth time during the past five months, the regional inflation gauge was above neutral growth.  The inflation gauge, which tracks the cost of raw materials and supplies, advanced from 52.1 to 56.  

“We are recording increasing signs of heightened inflationary pressures,” Goss said. “I continue to expect that current Federal Reserve interest rate policy and federal deficit spending will result in elevated inflationary pressures as early as the middle of 2010.  Consumers, business leaders and investors need to brace for higher inflation and higher interest rates in 2010.”

Looking ahead six months, economic optimism, captured by the confidence index, dipped to a still healthy 60, from July’s 66.7 and June’s 67.9. 

Trade numbers for August reflected somewhat stronger economic conditions among trading partners with new export orders advancing from 42.9 to 50.1.  On the other hand – and potentially indicating economic softness “at home” – imports plunged from 41.2 to 35.7. 

Colorado’s leading economic indicator for August, based upon a survey of supply managers in the state, once again dipped below neutral growth 50.  

The August Business Index declined from 51.1 to 47.5, but was higher that June’s 42 and May’s 44.  

Components of the overall index for August were new orders at 51.6, production at 50.7, delivery lead time at 47.9, inventories at 39.4, and employment at 46.5. 

“The pace of job losses in the state has slowed significantly over the past three months; even so, pullbacks from durable goods producers more than offset upturns in non-durable goods manufacturers in the state,” Goss said. “Colorado’s economy is slowly crawling back to growth neutral according to our survey.  The state is not likely to experience any positive growth until the final quarter of 2009.”