Written by The Business Journal Staff
For the thirtieth consecutive month, the San Joaquin Valley Business Conditions Index rose above the 50.0 growth neutral threshold.
The business index, a leading economic indicator from a survey of individuals making company purchasing decisions for firms in Fresno, Kings, Madera and Tulare counties, continues to point to positive growth for the next 3 to 6 months, according to Dr. Ernie Goss, a research associate at Fresno State’s Craig School of Business and the author of the monthly index, which is produced using the same methodology as that of the national Institute for Supply Management.
The May business index improved to 51.2 from 50.4 in April. “Readings over the past months are in a range pointing to softer growth over the next 3 to 6 months for the region,” Goss said.
An index greater than 50.0 indicates an expansionary economy over the course of the next three to six months.
“According to our survey results over the last several months, economic growth will remain positive, but somewhat weaker in the months ahead,” Goss said. “However, it should be noted that growth for the region has been vigorous, exceeding the nation’s growth by a hefty margin over the past year. Manufacturing activity, especially food processor and other durable goods manufacturers and construction, was strong for the month.”
Employment was a weak spot in the May index. For a second straight month, the regional hiring gauge fell below growth neutral 50.0 threshold.
The May employment index expanded to 49.7 from April’s 49.4. Until the last two months, San Joaquin businesses had been boosting employment at a strong pace.
“I expect job gains to once again be a part of the economy over the next several months and equal that of the nation,” Goss said. “Job gains are likely to escalate for manufacturing and construction in the area.”
This month company officials were asked to name the greatest threat to 2016 economic prospects. More than one-third, or 35.7 percent, indicated that finding and hiring qualified workers represented the number one risk to business economic prospects for the rest of the year.
Other factors named included approximately 14.3 percent that named global economic weakness, 21.4 percent reported U.S. economic weakness, 21.5 percent indicated rising government regulation, and the remaining 7 percent reported other issues.
Looking ahead six months, economic optimism, as captured by the business confidence index, slumped to 45.9 from April’s frail 48.9.
“Weak agriculture commodity prices, and global economic weakness continue to weigh on expectations of future economic conditions,” Goss said.