Valley economic index points to growth despite small slip

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Valley economic index points to growth despite small slip

The August San Joaquin Valley Business Conditions Index fell from July’s reading but continues to point toward economic growth. The overall index in August slipped to 53.9 from July’s 57.1 but remains firmly above the 50.0 growth neutral threshold indicating an expansionary economy over the next three to six months.

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

“According to our survey results over the last several months, economic growth will remain healthy in the months ahead. Manufacturers in the area continue to expand at a positive but slow pace. Warehousing and wholesale trade firms are experiencing healthy growth,” said Dr. Ernie Goss, research faculty with the Craig School.

This month, business leaders and supply managers were asked to name their biggest economic challenge for the next 12 months. Twenty-seven percent indicated rising regulatory costs were the greatest economic threat, and one-fifth named low consumer demand as the biggest threat to their business.

Goss said the index shows progress in hiring across a broad range of industries. “Manufacturing firms, including food processors, and wholesale businesses are adding employment. As a result of consistent regional growth, the area’s unemployment rate has declined to its lowest level in almost seven years,” he said.

Other survey findings:

  • Employment: The hiring gauge has remained above the 50.0 threshold since October 2013. In August the index declined to a still healthy 54.1 from 54.8 in July.
  • Wholesale prices: The prices-paid index, which tracks the cost of purchased raw materials and supplies, fell from 56.8 in July to 49.8 in August.
  • Business confidence: Looking ahead six months, economic optimism, captured by the business confidence index, declined to 53.5 from July’s 57.1.Goss points to sinking agriculture and energy commodity prices, along with global economic uncertainty, pushing expectations of future economic conditions down for the month.
  • Inventories: Businesses increased inventories of raw materials and supplies for the month at a faster pace than in July. The July inventory expanded to 53.5 from last month’s 52.5.
  • Trade: The new export order index increased slightly to 42.8 from 42.7 in July, and the import index dipped to 51.1 from 52.2 in July. According to Goss, the strong U.S. dollar, which makes U.S. goods less competitively priced abroad, is negatively affecting regional exports but boosting imports in the four-county region.
  • Other components: Other components of the August Business Conditions Index were new orders at 54.0, down from 61.5 in July; production or sales at 56.4, lower than July’s 62.7; and delivery lead time at 52.2 from 54.3 in July.

For more information, contact Goss at 559.278.2352.

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