Business Council first quarter outlook shows optimism tempered by supply chain disruptions

Ongoing concerns about labor shortages, supply chain disruptions and inflation have dampened expectations for the next six months, but business leaders remain optimistic, according to the economic outlook for the first quarter of the Iowa Business Council released Monday.

The index ranking is based on an average of a formula the Business Council uses to measure performance in sales, capital expenditure and employment, with an index above 50 indicating positive sentiment.

The Iowa Business Council is a nonpartisan organization made up of 22 members who are the leaders of some of the largest companies in the state. He works to advance the state’s economy through leadership, research and advocacy.

The index for the first quarter was 65.78, down from 68.86 in the fourth quarter of 2021, the second highest index score since 2018. The recent score marks the seventh consecutive quarter the index has remained in territory positive despite lower index scores in each category. what the report measures.

The biggest drop was in the employment index, which fell 3.96 points to 63.15, with the majority of respondents indicating that hiring remains a top concern. Of the respondents, 68% said that hiring remains difficult or very difficult.

The sales and capital expenditure indices each fell by 2.64 points, to 69.73 and 64.47 respectively.

Eighty-four percent of respondents ranked attracting, developing and retaining a quality workforce as their top concern, followed by an unfavorable business climate, including supply chain disruptions. procurement, regulations and taxes, 74%. The data for the report was collected shortly after the Cuts approved by the Iowa Legislature in state personal income tax, the corporate tax rate, and the elimination of taxes on retirement income.

Joe Murphy, executive director of the Business Council, said supply chain disruptions were the main driver of unfavorable business climate concerns.

“Our members continue to struggle with this,” he said. “Every week there seems to be a new supply chain issue. Think about how Ukraine is affecting us right now. The other thing we saw a big jump in was the cost of products and services , so inflation and how that also takes into account the unfavorable business climate.

The cost of products and services ranked third among the concerns identified by respondents, at 63%. Nearly 80% of respondents said they expected no change in supply chain disruptions over the next six months, while 15% expected some improvement.

“As our members examine the supply chain and how continuing constraints will negatively impact sales and capital investment…while our members are generally positive on these issues, they do not expect what supply chain conditions change a lot over the next six months,” Murphy said.

He said there was optimism at the end of 2021 that these supply chain disruptions would diminish in 2022, but that has not been the case.

“As we work through the first quarter of 2022, that optimism has receded a bit,” he said.

Murphy said the fact that Iowa has stayed in positive sentiment territory for seven straight quarters is a testament to the state’s resilience in recovering from the pandemic.

“As we continue to emerge from the pandemic, Iowa continues to leapfrog the nation in recovery efforts,” he said.

Murphy said with Iowa’s strong manufacturing base and the state’s gross domestic product remaining above $190 billion a year, the state remains in a good position to move forward.

“Other states are catching up because we had such a great acceleration in the beginning. States are finally catching up on their recovery efforts, but we have come a long way in so many quarters, which we are very happy about,” a- he declared.

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