Valley economic index reaches another record high

The San Joaquin Valley Business Conditions Index rose to a record-high 61.2 from February’s reading of 60.2, also a record high. An index greater than 50 indicates an expansionary economy over the course of the next three to six months.

“The overall index for March jumped to its highest level since initiation of the survey and up from February’s reading, which was also a record high,” said Dr. Ernie Goss, research faculty with the Craig School of Business. “The region is currently experiencing solid manufacturing growth combined with upturns in regional construction. However as in past months, durable, or heavy manufacturing, continues to lag behind non-durable manufacturing, including food processing.”

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.

Other survey findings:

Employment: After moving below growth neutral for December, the employment gauge climbed above the threshold every month since. The March index advanced to a very strong 62.5 from 54.2 in February. “Over the past 12 months, the San Joaquin region has experienced job growth of 2.9 percent, which is well above the pace of the nation of 1.5 percent. Our surveys over the last several months indicate that the San Joaquin job market will continue to expand at a pace slightly above that of the nation through the third quarter of 2017,” Goss said. Approximately 58.3 percent of firms expect net new hiring over the next six months. This is up from 24.6 percent reported by firms in June of last year.
Wholesale prices: The prices-paid index, which tracks the cost of purchased raw materials and supplies, climbed to 68.1 from 63.5 in February, indicating rising, but not excessive, inflationary pressures at the wholesale level. Goss expects inflationary pressures at both the consumer and wholesale levels to move higher in the months ahead with additional Federal Reserve interest rates in the next three months.
Business confidence: Economic optimism, as captured by the business confidence index, dipped to a still strong 74.2 from 75.3 in February. Goss said businesses in the region and nation continue to expect improving business conditions, profits and a corporate tax cut, but a failure of D.C. to enact corporate tax cuts may shrink that confidence.
Inventories: In another show of economic confidence, the inventory index remained in a healthy range for March. The March inventory fell to a strong 61.2 from 68.7 in February.
Trade: Both the new export orders index and import index remained above growth neutral for March. The export reading fell to 50.3 from February’s 56.1, and the March import reading slipped slightly to 56.6 from 56.9 in February.
Other components: Other components of the March Business Conditions Index were: new orders at 62.0, down from 67.2 in February; production or sales at 64.8, up from February’s 63.5; and delivery lead time at 61.6, up from last month’s 47.7.