Written by The Business Journal Staff
Local economic prospects took a hit in February according to the latest San Joaquin Valley Business Conditions Index, which reached its lowest level since August 2016.
The index for February fell to 50.5 from January’s 55.7. While it marks the 18th straight month of growth above the neutral reading of 50.0, the survey also tracked weakness among non-durable goods producers, said Ernie Goss, research faculty with the Craig School of Business at Fresno State.
The index is compiled based on a survey of individuals making company purchasing decisions for firms in Fresno, Kings, Madera and Tulare counties.
“For a fourth consecutive month, the survey tracked weakness among non-durable goods producers, except for food processors. However, gains for durable goods manufacturers more than offset weakness among non-durable goods producers,” Goss said.
Employment: For second straight month, the employment gauge sank below growth neutral. The February index slumped to 40.7 from January’s 45.0. “Despite the downturn in our survey, the San Joaquin [Valley] has experienced strong job growth at 2.7 percent over the past 12 months, or almost double the nation’s 1.5 percent expansion. I consider the last two months as outliers for the region with job growth likely to continue for 2018,” Goss said.
Wholesale Prices: The prices-paid index, which tracks the cost of purchased raw materials and supplies, dipped to a robust 77.8 from 80.6 in January, indicating elevated inflationary pressures at the wholesale level. “I expect inflationary pressures at both the consumer and wholesale level to rise in the months ahead. Moreover, I expect the Federal Reserve to raise short-term interest rates at their March 21 meetings by one quarter of one percentage point (25 basis points),” Goss said.
Business Confidence: Looking ahead six months, economic optimism, as captured by the business confidence index, dipped to a still robust 66.4 from January’s 69.1.
Inventories: In another show of economic confidence, the inventory index remained above growth neutral for February. The February inventory fell to a solid 54.4 from January’s 58.8, indicating growth in inventories but at slower pace than for January.
Trade: The new export orders index increased to a weak 47.5 from January’s 35.0, while the import index fell to 61.2 from 64.0 in January.
Other components: Other components of the February Business Conditions Index were: new orders at 45.5, down from 51.0 in January; production or sales at 50.5, down from 61.0 in January; and delivery lead time at 58.9, down from last month’s 62.7.