New Valley Business Conditions Survey predicts slow growth

The debut of the San Joaquin Valley Business Conditions Survey from Fresno State’s Craig School of Business indicates that the area encompassing Fresno, Madera, Kings and Tulare counties likely will experience slow economic growth the next three to six months.

The index stood at 53.0 for September. An index greater than 50 indicates an expansionary economy.

Other September survey results:

• Survey participants report pullback in employment for the month.
• Approximately 30 percent of firms expect this year’s holiday sales to be up from last year by more than 5 percent.
• Approximately 18 percent of firms expect this year’s holiday sales to be down from last year by more than 5 percent.
• Firms report job losses for September.

The survey is commissioned by the Craig School from Dr. Ernie Goss of the Goss Institute for Economic Research in Denver.

The index, a leading economic indicator for the region, is identical to that produced monthly by the national Institute for Supply Management (www.ism.ws). The overall index, referred to as the Business Conditions Index, ranges between 0 and 100.

“The results for the San Joaquin Valley are very similar to those for the nation, with the index pointing to slow but positive economic growth, but with a lack of hiring,” Goss said. “Consistent with the area’s high unemployment and negative employment growth, the September employment index was 44.0, or well below growth neutral.

“A high share of the 160 firms in our September survey reported pullbacks in hiring and continuing layoffs, though slight,” he added. “For September, 28 percent of firms reported reduced employment, while only 16 percent indicated an upturn in employment.”

The prices-paid index, which tracks the cost of raw materials and supplies, was a robust 65.9. Goss said, “Much like the national survey, our survey does not support the hypothesis of deflation. Based on our survey results, as well as other surveys of supply of purchasing managers, I still think fears of deflation are overblown. Once the economy gets back on track, inflation and price bubbles will be the problem, not deflation.

“As expected, economic optimism was slightly positive but certainly not stellar,” reported Goss. Looking ahead six months, economic optimism, captured by the September business confidence index, stood at a tepid 51.1, he added.

Trade numbers for September mirror the slow growth economy, with new export orders at 53.9, while the import reading was also slightly above growth neutral at 52.7.

“Exports will be an important component of the region’s expansion in the months ahead,” said Goss. “We need to see improving export orders in the coming months.”

Goss said supply managers or business owners who make their firms’ purchasing decisions were asked about expectations for the holiday buying season this year compared to last. Almost three in 10 – 28.9 percent – expect holiday sales to grow by more than 5 percent while 17.8 percent anticipate holiday sales declining by more than 5 percent. The remainder expect sales to range from no change (35.6 percent), increase by 1 to 4 percent (15.6 percent) or decline by 1 to 4 percent, (2.2 percent).

The September inventory index was 55.3, Goss reported. “Beginning in the first quarter of this year, U.S. companies began growing their inventory levels. This inventory expansion has been an important source of growth. However, it is clear inventory growth cannot continue to be a catalyst for growth.”

Other components of the September Business Conditions Index were new orders at 58.6; production or sales at 57.3; and delivery lead time at 50.0.

The table details survey results for September. October survey results will be released Nov.1

For more information, contact Goss at 559.278.2352.

Related links:

• Craig School
• Goss on Twitter
• Goss Institute