Exports push states economic indicator higher

RBC I For the 28th straight month, the overall index for the mountain states region, a leading economic indicator for the three-state area of Colorado, Utah and Wyoming, advanced above growth neutral 50.0.  The national index has risen above growth neutral for 30 consecutive months but has remained lower than the regional reading. The gap between the results of the two surveys has widened, primarily as a result of Mountain States’ growth tied to the region’s large energy sector, exports and agriculture.      
“Even though growth has been especially strong for firms tied to energy and agriculture, our surveys indicate that growth has spilled over into a broad range of industries across the region. The Federal Reserve’s cheap money policy continues to boost the prospects of firms selling in international markets. Surveys of supply managers in the region point to healthy job growth for the first half of 2012.  Last month more than half of respondents indicated that higher energy prices posed the biggest risk for the regional economy. This risk has risen to levels we have not seen since 2008. With the Federal Reserve pledging to keep interest rates low, the U.S. dollar will continue its long term slide. This will continue to push energy commodity prices higher and make U.S. goods more competitively priced abroad, assisting exports,” Goss Institute for Economic Research Director Dr. Ernie Goss said today.
The February employment index advanced to 61.2 from January’s healthy 57.2. “This month we asked supply managers to assess layoff expectations for 2012. Only 5 percent of respondents expect layoffs for 2012.  This is down significantly from last year when we asked this same question.  The labor market in the three-state region is clearly improving, with job opportunities expanding in both manufacturing and non-manufacturing sectors,” said Goss.
The prices-paid index, which tracks the cost of raw materials and supplies, expanded to a robust 74.8 from January’s already inflationary 73.9.  “Given the excessive inflationary pressures we are tracking in our survey and vigorous economic growth expected in the months ahead, I think the Federal Reserve will have to violate their pledge to keep short term interest rates at their current record lows until 2014,” said Goss.
“In my judgment, the Fed’s pro-growth stance poses significant inflation risks even as it boosts growth for firms connected to agriculture and energy.  Thus, I expect a Fed rate hike as early as the final quarter of 2012.  Our regional gauge and most national measures of price pressures are too high for the Fed to be so aggressive in terms of low interest rates and high money supply growth.  I attribute at least half of the increase in 2012 oil prices to declines in the value of the dollar precipitated by the easy money policy of the Fed,” said Goss.
Looking ahead six months, economic optimism, as captured by the February business confidence index, advanced to 58.3 from January’s 57.8. “Despite higher energy and commodity prices, recent positive economic data on the national front have had clear and positive impacts on supply managers’ outlook,” said Goss.
In another signal of an improving outlook, supply managers in the three-state region added to inventories of raw materials and supplies for the month. The index dipped slightly to a strong 64.1 from 66.3 in January. “This is the 27th straight month that we have recorded inventory growth, and it remains a positive growth factor as it has been for the U.S. economy,” said Goss.
Trade:  February’s export numbers for the Mountain States region dipped a bit from January’s healthy level declining to 58.8 from January’s vigorous 60.0.  At the same time, February imports expanded to 58.1 from 54.7 in January. “Exports continue to be an important source of growth for the region. Additionally, an expanding regional economy has pushed firms to increase their purchases from abroad,” said Goss.