OMAHA — After five consecutive months of showing growth, Nebraska’s business conditions index has taken a turn for the worse, according to Creighton University’s Mid-America Business Conditions Index.

Meanwhile, the June index for the broader nine-state area that includes Nebraska shows the regional economy as growing, albeit at a slower pace.

Creighton University’s forecasting group, led by economist Ernie Goss, since 1994 has conducted the monthly survey of manufacturing and supply managers to gauge economic conditions and headwinds.

Besides Nebraska, participating states include Iowa, Kansas, Missouri, South Dakota, North Dakota, Oklahoma, Minnesota and Arkansas.

For each state and also for the overall region, the survey looks at components such as employment, prices, confidence level, inventory and trade — and produces a score. Anything above a reading of 50 signals growth.

Nebraska’s collective reading for June declined to 46, compared to 51 a month earlier. Only one individual component — delivery lead time — reached an above-growth score. Nebraska’s score for employment was 40.

Goss said that Nebraska’s downturn likely is attributable to factors including recent drought conditions and food processing exports.

“The manufacturing sector, particularly food processing, weakened in Nebraska,” he said.

And negative effects of drought in both Nebraska and Kansas have spilled into parts of the economy beyond agriculture, Goss said.

Region-wide, supply managers who were surveyed identified supply chain disruptions as their top threat. Also worrying them were labor shortages, higher inflation and higher interest rates.

Goss said companies are engaging in “labor hoarding,” which he defines as not laying off workers in the fear they won’t be able to hire them back. He said that has resulted in lower workforce productivity.

“The biggest challenge to the overall U.S. economy, which is underreported and overly important, is labor productivity,” said Goss. “It’s been declining for a year and a half now — the worst labor productivity we’ve seen since 1947.”

While inflation dropped in June, only one out of 10 supply managers reported lower prices for the month. Goss said he expects the Federal Reserve to raise interest rates by 0.25% when it meets in July.

“The economy is slowing down, and inflation is coming down a bit faster than what the Fed intended,” Goss said. “The potential is still there for a recession in the third and maybe fourth quarter, but right now it’s slow-to-no-growth.”

This story was originally published by Nebraska Examiner, an editorially independent newsroom providing a hard-hitting, daily flow of news. It is part of the national nonprofit States Newsroom. Find more at nebraskaexaminer.com.