Mid-America economy strained as business index falls under growth threshold

Economic momentum fell last month across the Midwest amid inflation, labor market weakness and increasing trade tensions as Creighton University’s monthly survey of supply managers revealed the first contraction in business activity in seven months..The business conditions index dropped to 49.4, falling below the growth-neutral threshold of 50.0, signaling a slight decline in the nine-state regional economy that stretches from Minnesota to Arkansas.Business confidence took a sharp hit last month as the confidence index fell to 42.6 from 50.0. Managers expressed growing unease about new orders and future economic conditions. “Only one in six supply managers expects better business conditions for their firm in the next six months,” said Ernie Goss, director of Creighton’s Economic Forecasting Group.Employment remained weak as July marked the fourth straight month of job losses in manufacturing. The regional employment index fell to 45.4, down from 49.4 in June. “The region has now experienced six consecutive months of job declines in manufacturing, erasing early 2025 gains driven by pre-tariff stockpiling,” Goss said.The Mid-America region shed 12,900 manufacturing jobs last year — a nearly 1 percent drop — which is comparable to the national 0.7 percent decrease nationwide, according to the report. Inflationary concerns intensified, with the wholesale price index rising to 69.7 from June’s 67.9 amid mounting input cost pressures. On average, supply managers expect input costs to rise 7.8 percent over the next year due to tariffs.Most companies reported delaying major changes. Less than 7 percent of supply managers said they had switched to domestic suppliers from international suppliers, while two-thirds made no changes and 26.3 percent shifted to different foreign suppliers.Export activity weakened, with the new export orders index falling to 38.3 — marking four straight months of decline. According to U.S. trade data, regional manufactured exports fell nearly 5 percent in the first five months of 2025 compared to the same period in 2024.Goss expects the Federal Reserve will cut interest rates at its Sept. 16-17 meeting due to economic softening and increased inflation concerns.