For a fourth straight month, Fresno State’s Craig School of Business San Joaquin Valley Business Conditions Index declined in September, sinking below growth-neutral 50.0 for the first time since January, signaling slow to no growth in the months ahead.

The index is a leading economic indicator from a survey of individuals making company purchasing decisions for firms in Fresno, Madera, Kings and Tulare counties. The index is produced using the same methodology as that of the national Institute for Supply Management (

Overall, the index produced by Craig School research associate Dr. Ernie Goss dipped to 49.5 from 50.6 in August. An index greater than 50 indicates an expansionary economy over the course of the next three to six months.

“Much like the rest of the nation, the area is growing at a slow pace,” said Goss. “Our survey results point to slow to no growth for the final quarter of 2012. The national ISM index has now moved below growth neutral for four months in a row.”

The hiring gauge improved slightly in September: 50.4 from August’s 48.6. “The area has been adding jobs but at a very slow pace,” said Goss. “Our surveys over the past several months point to slow to no job growth for the final quarter of 2012. Expansions for non-durable goods producers will be offset by pullbacks for durable goods manufacturers.”

The prices-paid index, which tracks the cost of raw materials and supplies, slipped to a still inflationary 62.1 from 62.3 in August. “At the wholesale level, we are tracking price growth at an expanding pace. Over the next six months, survey participants expect the costs of inputs that they purchase to rise by 2.9 percent,” Goss said.

 “This annualized rate of 5.8 percent is much too high for the Federal Reserve to ignore any Fed action on inflation. With food prices pushed higher by the drought, further cheapening of the dollar by the Fed via QE3 (bond buying) would only serve to drive food and energy prices even higher with consumer prices rising well above the Fed’s comfort zone,” said Goss.

Looking ahead six months, economic optimism, captured by the business confidence index, fell to a weak 36.1 from 38.8 in August. “Survey participants, much like the entire business sector, remain very pessimistic regarding future economic conditions even with the improving housing market,” Goss reported. “The drought, the fiscal cliff, the elections and European economic turmoil are all weighing on economic confidence.”

Businesses expanded inventories for the month. The September inventory reading climbed to 55.4 from 54.0 in August. “At this point,” Goss said, “we cannot determine if this expansion is planned or unplanned. Given the other negative indicators in our August survey, it is likely that the inventory accumulation resulted from a downturn in sales and production rather than a more optimistic outlook.”

New export orders once again declined for the month, sinking to 33.5 from August’s 34.8. At the same time, August imports contracted for the month with an index of 43.2, down from 47.1 in August. “Weaker global and area growth are weighing on both foreign purchases and sales,” said Goss.

Other components of the August Business Conditions Index were new orders at 41.2, down from 47.7 in August; production or sales at 45.6, down from 47.4; and delivery lead time at 54.8, lower than August’s 55.0.

For more information, contact: Goss at 559.278.2352

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