Supply managers see slowing economic growth amid tariffs

Manufacturers see the regional economy as growing but continue to lack optimism for the coming months due to tariffs, according to Creighton University’s May Business Conditions Index. .The business conditions index fell last month, to 51.0 from 53.3 in April, but remained higher than the growth-neutral score of 50 for the fifth straight month. The index tracking economic confidence for the next six months increased to 43.2 from 37.5 in April. “Due to concerns regarding global economic tensions and rising tariffs, only one in five supply managers expect improving business conditions over the next six months,” said Ernie Goss, chair in regional economics at Creighton University. One-third of manufacturers switched their input providers due to tariffs or the threat of tariffs, according to the report. The manufacturing employment index remained under growth neutral as more than half of supply managers said tariffs and impending tariffs have caused prices to rise for production inputs. The survey was taken before the U.S. Court of International Trade last week blocked President Donald Trump’s 10 percent baseline tariff on most countries along with separate levies on Canada, Mexico and China the administration tied to allegations of tracking fentanyl.That decision was then halted by a Washington, D.C.-based federal appeals court. Trump has taken a more aggressive approach to tariffs in his second term than his first. As part of a sweeping round of tariffs announced April 2 as part of what he deemed “Liberation Day,” Trump hiked tariffs on China-produced goods as high as 145 percent before temporarily easing them last month. “The Creighton survey is recording significant volatility, much like other regional economic measures,” Goss said. “Proposed and implemented tariffs are producing economic volatility as well as slower growth.” According to the International Trade Administration, the regional economy exported $23.4 billion in manufactured goods for the first quarter of this year, down 1.4 percent from $23.7 billion for the same period last year. The index tracking employment increased to 49.4 from 44.9 in April. The region shed 12,500 or 0.8 percent of manufacturing jobs, according to the report, which tracked Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.“First quarter employment was pushed higher due to higher production in anticipation of the fallout from tariffs,” Goss said. “Readings from the last two months represented a return to manufacturing job losses in the region.” May’s price gauge increased to 67.4 from 65.0 in April, which Goss said reveals rising wholesale inflation. Goss expects the Federal Reserve will reduce short-term interest rates at its next meetings later this month. Other report findings included:The index tracking levels of raw materials and supplies dropped to 51.6 from 56.7 in April. Goss said firms have grown their inventories for four of the first five months of this year to front-run tariffs. The index tracking new export orders fell to 44.8 from 46.2 in April as supply managers reduced their purchases from abroad over the last three months following record imports in January and February. May’s import index increased to 29.8 from 12.5 the previous month. The index tracking new orders fell to 51.0 from 52.9 in April, while the production or sales index dropped to 49.4 from 55.4 the previous month. The index tracking the speed of deliveries of raw materials and supplies fell to 53.7 from 56.8 in April amid falling supply chain disruptions or delays.