Written by The Business Journal Staff
The Central Valley’s economic index declined slightly in May, but growth should continue despite increasing difficulty hiring qualified workers.
The San Joaquin Valley Business Conditions Index fell to 56.9 from 57.9 in April. An index greater than 50 indicates and expansionary economy in the next three to six months.
The index, produced by the Craig School of Business at Fresno State, surveys individuals making company purchasing decision in firms in Fresno, Kings, Madera and Tulare counties.
“Both durable and non-durable goods manufacturing reported solid gains for the month,” said Dr. Ernie Goss, research faculty with the Craig School of Business at Fresno State. “Food processing continues to be a major contributor to regional growth. As in recent months, construction and wholesale trade activity in the San Joaquin Valley continued to expand at a healthy pace. I expect this pace to remain strong for the next three to six months.”
This month, survey participants were asked to identify the greatest economic challenge to 2018 business operations. Almost four in 10, or 38.1 percent, reported that finding and hiring qualified workers represented the top challenge facing their firms. Almost one-fourth, or 23.8 percent, reported that U.S. economic weakness was potentially the greatest economic challenge to their operations.
The employment index moved to 54.7 in May, up from April.
“The San Joaquin region has experienced strong job growth at 2.8 percent over the past 12 months, or almost double the nation’s 1.5 percent expansion over the same period of time. I expect the region to continue to add jobs, but at a somewhat slower pace for the next three to six months,” Goss said.
The prices-paid index, which tracks the cost of raw materials and supplies, rose to 74.2 from 73.3 in April, indicating elevated inflationary pressures. The trend is expected to continue even as the Federal Reserve is expected to raise short-term interest rates in hopes of reversing inflation.
Business owners continue to be confident, with an economic optimism index of 69.9 for May, up from 65.9 in April.
“Healthy profit growth and still low interest rates boosted business confidence. However, the May survey was completed before the Trump administration’s tariff increase placed on steel and aluminum beginning June 1. I expect these tariffs to shrink business confidence in the months ahead,” Goss said.
The new export orders index slumped to 43.9 from 52.2 in April, while the import index slipped to solid 56.3 from 57.5 in April.