The May San Joaquin Valley Business Conditions Index has reached its highest level since March 2013.

For the 17th time in the past 18 months, the San Joaquin Valley Business Conditions Index rose above the growth neutral threshold.

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 overall May index advanced to 57.4 from 55.9 in April. An index of greater than 50 indicates an expansionary economy over the course of the next three to six months.

“While construction activity remains below pre-recession levels, the region continues to experience solid improvements in this industry. The region has lost approximately 36.9 percent of its construction jobs compared to pre-recession levels,” said Dr. Ernie Goss, research faculty with the Craig School of Business. “Additionally, healthy growth for wholesale trade firms and food producers is boosting overall growth in the region. Our surveys over the past several months indicate that overall growth will remain healthy for the next three to six months.”

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

Other survey findings:

  • Employment: After moving below growth neutral for January, the hiring gauge has moved above the 50.0 threshold for the past four months. The job index expanded to 58.8 from 55.1 in April.
  • Hiring for 2014: About 10.6 percent of firms in the region anticipate layoffs for the remainder of this year, while 42.1 percent expect new hiring for 2014. The remaining 48 percent expect little or no change in employment levels for the rest of 2014. More than one-fourth, or 26.3 percent, of the businesses expect rapid new hiring for the rest of 2014.
  • Wholesale prices: The prices-paid index, which tracks the cost of purchased raw materials and supplies, increased for the month. The wholesale inflation gauge declined to 71.4 from 75.3 in April. On average, business leaders in our survey expect prices to rise by 4.3 percent in the next six months, or approximately 8.6 percent annualized.
  • Business confidence: Looking ahead six months, economic optimism, captured by the business confidence index, slipped to a still solid 55.6 for May and down from last month’s 56.2.
  • Inventories: Businesses expanded inventories of raw materials and supplies for the month but at a slower pace than in April. The May inventory reading sank to 57.8 from 60.0 in April.
  • Trade: The new export order declined to 55.5 from April’s 56.0, but the index remains strong, which is encouraging for the regional economy because exports are an important component of growth, Goss said. The regional import reading for May slid to 56.2 from April’s 57.3.
  • Other components: Other components of the May Business Conditions Index were new orders at 58.6, up from 56.7 in April; production or sales at 52.9, up from 50.7; and delivery lead time at 59.1, up from 57.1.

For more information, contact Goss at 559.278.2352.

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