The overall San Joaquin Valley Business Conditions Index in July rose slightly to 49.8 from 49.5 in June, but nonetheless remains below the growth neutral threshold for the second consecutive month. These results point to slowed economic and business growth. An index greater than 50 indicates an expansionary economy over the course of the next three to six months.
“Two months of reading slightly below growth neutral do not necessarily set the stage for negative economic growth for the San Joaquin Valley. We will have to see several months of readings below 45 before a negative economic growth forecast will be issued,” said Dr. Ernie Goss, research faculty with the Craig School of Business at Fresno State. “However, weaker readings since January of this year are pointing to slower growth.”
According to Goss, pullbacks for the area’s durable goods producers and construction firms more than offset growth among non-durable goods manufacturers for the month.”
The index, produced by the 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: After three straight months below growth neutral, the job index rose to the 50.0 threshold. The employment index expanded slightly to 50 from June’s 49.8 and May’s 49.7. Goss said that until recently local businesses have boosted 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. He expects overall job gains to be slight for the region in the months ahead.
- Wholesale prices: The prices-paid index, which tracks the cost of purchased raw materials and supplies, rose to 57.4 from June’s 54.1. In keeping with other regional surveys and the national survey, Fresno’s results over recent months show modest but advancing inflationary pressures at the wholesale level.
- Business confidence: Looking ahead six months, economic optimism, as captured by the business confidence index, climbed to a solid 54 from 47.9 in June.
- Inventories: Businesses reduced inventories of raw materials and supplies for July. The July inventory index improved to 45.9 from 41.9 in June.
- Trade: The new export orders index remained below growth neutral for July. The index slumped to 31.5 from June’s 34.4, and the import index sank to 38.8 from 46.4 in June. “The U.S. dollar remains relatively strong making U.S. goods less competitively priced abroad. At the same time, weaker regional growth reduced imports into the area for the month,” Goss said.
- Other components: Other components of the July Business Conditions Index were: new orders at 48.8, down from June’s 54.8; production or sales at 48.1 from 49.5 in June; and delivery lead time at 56.1 which is up from last month’s 51.4.
For more information, contact Goss at 559.278.2352.