By Rachel Whitten
March 1, 2010

(KansasReporter) TOPEKA, Kan. - Supply managers see brighter days ahead in manufacturing, which translates to a favorable economic recovery period for Kansas and much of the Midwest region.

A study released Monday by Creighton University economics professor Ernie Goss said that the Mid-America leading economic indicator has climbed to the highest level in almost three years. This has been fueled by the supply managers, who are increasing their inventories.

"Supply managers—these are sort of the canaries in the coal mine, so if they’re seeing good things right now, then we in the broader economy will see good things in the months ahead," Goss said.

The index jumped to 61.0 in February, up from 54.7 in January, which was up from 50.3 during December. An index of 50.0 on the 100 point scale is considered the midpoint at which the economy is neither growing nor shrinking.

"It was a quite unexpected number…it was a good report," Goss said.

While the broader economy might start roaring again in the months ahead, Goss expects inflation to start roaring as well. The prices-paid index, which tracks the cost of raw materials and supplies, has been above growth neutral for nine months in a row. This indicates that prices are rising, and 29 percent of supply managers surveyed expect that prices will go up by more than five percent in the next six months.

"The [Federal Reserve Board] keeps telling us ‘everything is well contained, relax folks, inflation’s good…’ but I think in the pipeline, it’s above what the Fed targets, certainly not to the 1980’s level, but we’re talking about inflation at the 3-4 percent by middle to the end of 2010," Goss said.

But employment numbers, typically the last to rebound after a recession, have grown in the region for the second straight month. The February indicator was at 56.1, up from December’s 51.7.

"This is the first time we’ve seen this since 2007, we’re seeing some new hiring among the companies we survey, so if they’re seeing job growth at the company level now, we’ll see job growth later on for the broader economy," Goss said.

Kansas as a whole could have a harder time seeing employment numbers grow because many of its jobs are manufacturing and agriculturally based. While urban areas have an easier time growing, rural areas are typically slower to recover. Despite that, Goss said that for 2010’s second quarter, he expects minimal job losses in manufacturing while only modest overall job losses for the state.