Drought hurts business confidence as Valley economic index declines

The overall San Joaquin Valley Business Conditions Index dropped in January, but the indicator remained above the neutral threshold, pointing to slow growth for first part of 2014.

The index, produced by Fresno State’s Craig School of Business, is a leading economic indicator from a survey of individuals making company purchasing decisions in the counties of Fresno, Madera, Kings and Tulare.

The January index slipped to 50.8 from 52.8 in December. An index of greater than 50 indicates an expansionary economy over the course of the next three to six months.

According to Dr. Ernie Goss, research faculty with the Craig School of Business, weather conditions could be responsible for the declining index. “More and more businesses are reporting negative economic impacts from the drought.”

The index uses the same methodology as that of the national Institute for Supply Management.

Other survey findings:

  • Employment: For the first time in 14 months the hiring gauge dropped below the growth neutral threshold, dipping to 49.5 from 54.0 in December.
  • Wholesale prices: The prices-paid index, which tracks the cost of raw materials and supplies, climbed to 66.4 from 60.2 in December.
  • Business confidence: Looking ahead six months, economic optimism, captured by the business confidence index, slumped to 48.4 from December’s robust 54.2.
  • Inventories: Businesses once again reduced inventories of raw materials and supplies for the month. The inventory index remains below the growth threshold, growing to 48.1 from 46.1.
  • Trade: The new export order reading plummeted to 45.2 from December’s healthy 57.0, but the import reading for January rose to 52.6 from 50.6 last month.
  • Other components: Other components of the January Business Conditions Index were new orders at 50.3, down from 53.3 last month; production or sales at 49.3, down from 53.9 in December; and delivery lead time at 57.1, up from last month’s 56.7.

For more information, contact Goss at 559.278.2352.

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Kathleen Schock

written by

Director of Media and Development Communications, University Communications
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