Wholesale prices should rise 3 percent and wages 2.5 percent in 2014, a survey of Midwestern purchasing managers indicates, as the economy continues to pick up.
The managers said that overall, manufacturers in the nine-state region plan to add jobs, Creighton University economist Ernie Goss said.
The survey’s leading indicator, called the Business Conditions Index, advanced for the third straight month to 57.7 on a 100-point scale, from 53.2 in December. Indexes above 50 indicate growth.
Iowa’s index was 59.1, down from 61.5 in December but still highest in the region. Nebraska’s index rose to 52.2 after three months below growth-neutral.
For the region, Goss said the survey, taken late last month, showed that growth in business services and durable goods manufacturing more than offset pullbacks in nondurable goods manufacturing, such as food processing.
The survey’s employment index was 56.4, up from 48.7 in December. Goss said the region has regained the job totals lost in the 2008-09 recession, although the workforces in Arkansas and Missouri declined as discouraged workers stopped looking for jobs.
The survey also covers Iowa, Kansas, Minnesota, Nebraska, North Dakota, Oklahoma and South Dakota.
The managers predicted 2.5 percent average pay raises this year, compared with a 2 percent average they predicted when asked the same question in November.
They also expect wholesale prices to increase, with an inflation index of 71.6, compared with 63.6 in December.
“After remaining tepid for most of the last year, inflationary pressures at the wholesale level are once again expanding at a faster pace,” Goss said, calling the 3 percent estimate “modest.” He said he expects inflationary pressures to increase as the Federal Reserve scales back its economic stimulus.
The managers’ outlook for the coming six months yielded a 62.2 index, still strong but down from December’s 66.5, Goss said. He said their outlook was buoyed by improved employment, moderate inflation and less “political turmoil” in Washington.
Other indexes from the survey: inventories, 53.2, up from 51.3 in December; trade, 54.9, down from 55.6; imports, 52.4, up from 47.2; new orders, 58.5, up from 57.4; production or sales, 64.7, up from 56.8; and delivery lead time, 55.6, up from 52.