Inflation, supply chain issues continue drag on Iowa economy

OMAHA — Economic growth slowed in Iowa and in the Midwest during August, according to the latest survey of supply managers in the nine states.

Creighton University economist Ernie Goss says while the numbers slipped on the Business Conditions Index at the state and regional levels, both remained above growth neutral for the 27th straight month. Still, he says the forecast remains cloudy.

“I think the overall economy is certainly skating along, whether it’s slightly above positive or slightly below positive matters not,” Goss says. “It’s still a painful economy right now for a lot of consumers out there — and businesses.” Hiring during August dropped compared to July, while inflation rates remain punishingly high.

Goss says they asked supply managers to identify the biggest challenges moving forward in 2022. “Fifty-eight-point-six percent of the supply managers named supply chain disruptions,” Goss says. “Labor shortage was named by 24.1%, higher inflation was identified by 10.4%, and finally, higher interest rates was identified by 6.9% of the supply managers.” Supply chain issues are continuing to disrupt the flow of goods, and while gasoline prices have dropped, prices for groceries and most other goods and services remain very high.

“I expect inflation to soften in the months ahead but remain above 6% through third quarter of this year, well above what the Fed considers to be their target,” Goss says. “Their target, of course, is 2% so 6.5 as well above that.” The survey finds durable goods manufacturers in Iowa, including metal producers, are reporting solid growth, while Goss says non-durable goods producers, including food processors, reported healthy expansions.

Looking ahead six months, economic optimism increased to a very weak 32.2 from 26.8 in July, that’s on a scale of zero to 100. Goss says confidence levels for 2022 are the worst since the 2008-09 recession.