For the first time since December 2013, the overall San Joaquin Valley Business Conditions Index in June dropped below the growth neutral threshold. Last month the index fell to 49.5 from 51.2 in May. An index greater than 50 indicates an expansionary economy over the course of the next three to six months.

“One month below growth neutral does not, in of itself, set the stage for slower economic growth for the San Joaquin Valley,” said Dr. Ernie Goss, research faculty with the Craig School of Business at Fresno State. “We will have to see several months of sub-45 readings before a negative economic growth forecast will be issued. However, weaker readings since January of this year are raising concerns.”

This month respondents were asked the expected hiring situation at their firm for the second half of 2016. More than 25 percent anticipate new hiring, 53 percent expect no change in hiring and 20 percent forecast layoffs in 2016.

The index, produced by Fresno State’s Craig School, 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.

Other survey findings:

  • Employment: For a third straight month, the regional hiring gauge fell below the growth neutral 50 threshold. The employment index expanded slightly to a weak 49.8 from May’s 49.7. According to Goss, until recently local businesses had been boosting employment at a strong pace. Over the past 12 months, the region has experienced job growth of 3 percent, which is more than double the pace of the nation’s job growth. He expects job gains to be slight in the months ahead.
  • Wholesale prices: The prices-paid index, which tracks the cost of purchased raw materials and supplies, dipped to 54.1 from May’s 54.4. In keeping with other regional surveys and the national survey, Fresno’s results over recent months show only modest inflationary pressures at the wholesale level.
  • Business confidence: Looking ahead six months, economic optimism, as captured by the business confidence index, climbed to a weak 47.9 from May’s 45.9. “Since most survey participants completed the survey before Great Britain’s vote last week to exit the European Union, the confidence index does not fully account for recent increases in global economic uncertainty brought about by the vote,” Goss said.
  • Inventories: Businesses reduced inventories of raw materials and supplies for June at a faster pace than in May. The June inventory index plummeted to 41.9 from 49.1 in May.
  • Trade: The new export orders index remained below growth neutral for June. The index slumped to 34.4 from May’s 43.8, while the import index rose to 54.1 from 48.4 in May. “Even though the U.S. dollar has declined in 2016, it remains relatively strong, making American goods less competitively priced abroad. At the same time, weaker regional growth reduced imports into the area for the month,” said Goss.
  • Other components: Other components of the June Business Conditions Index were: new orders at 54.8, up from May’s 51.8; production or sales at 49.5, up from 49.0 in May; and delivery lead time at 51.4, which is well below last month’s 56.4.

For more information, contact Goss at 559.278.2352.

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