The San Joaquin Valley Business Conditions Index has advanced into a range that points to strong growth in the next three to six months.
The index is a leading economic indicator from a survey of individuals making company purchasing decisions for firms in the counties of Fresno, Kings, Madera and Tulare. The index is produced using the same methodology as that of the national Institute for Supply Management.
“This is the 16th straight month that the overall index has moved above growth neutral. For a second consecutive month, the survey tracked weakness among non-durable goods producers. However, gains for durable goods manufacturers more than offset weakness among non-durable goods producers,” said Ernie Goss, Ph.D., research faculty with the Craig School of Business at Fresno State.
Employment: After moving below growth neutral for December 2016, the employment gauge climbed above the threshold every month since. The December index advanced to a solid 53.6 from 50.1 in November. “Over the past 12 months, the San Joaquin region has experienced strong job growth at 1.6 percent, which is significantly above the nation’s 1.4 percent gain for the same period of time,” reported Goss.
Wholesale Prices: The prices-paid index, which tracks the cost of purchased raw materials and supplies, soared to 83.3 from 75.0 in November, indicating elevated and rising inflationary pressures at the wholesale level. “I expect inflationary pressures at both the consumer and wholesale level to rise in the months ahead. Even though both our regional wholesale inflation index and the U.S. inflation gauge are elevated, I expect the Federal Reserve to forgo a short-term interest rate hike at the next meeting of their rate setting committee on Feb. 1. However, I do expect a 0.25 percent rate increase at the March 15 meetings,” said Goss.
Business Confidence: Looking ahead six months, economic optimism, as captured by the business confidence index, expanded to a 70.1 from November’s 61.6.
Inventories: In another show of economic confidence, the inventory index remained above growth neutral for December. The December inventory was unchanged from November’s very healthy 62.6.
Trade: The new export orders index was unchanged from November’s 30.0, while the import index rose to 69.7 from 64.3 in November.
Other components: Other components of the December Business Conditions Index were: new orders at 52.0, up from 50.0 in November; production or sales at 61.9, down from November’s 66.7; and delivery lead time at 65.4, down slightly from last month’s 65.5.
For more information, contact Goss at 559.278.2352.
(University Communications news intern Yesenia Candelaria contributed to this report.)
Goss video economic summary: https://youtu.be/aF0S-5nGL-E
Craig School of Business: www.fresnostate.edu/craig/ubc/sjvs.html