Written by The Business Journal Staff
The San Joaquin Valley Business Conditions Index declined slightly into a range pointing to healthy growth in the next three to six months.
The index is a leading economic indicator from a survey of individuals making company-purchasing decisions for firms in the counties of Fresno Kings, Madera and Tulare. The index is produced using the same methodology as that of the national Institute for Supply Management.
From July’s solid 57.5, the region’s Business Conditions Index declined to a still growth-positive 55.1. Since bottoming out in August 2016, the index has moved into a range pointing to positive economic growth ahead. And index greater than 50 indicates an expansionary economy over the course of the next three to six months.
This is the 24th straight month that the overall index has moved above growth neutral. Both durable and non-durable good manufacturing reported solid gains for the month. As in recent moths, construction activity in the San Joaquin Valley continued to expand at a healthy pace.
The employment gauge moved lower to 55 from 57.5 in July. The San Joaquin region has experienced strong job growth at 2.7 percent over the past year, or significantly above the nation’s 1.6 percent expansion over the same period of time. The region’s unemployment rate has now fallen to its lowest level since September 2006.
“I expect the region to add jobs, but at a somewhat slower pace for the next three to six months,” said Ernie Goss, PhD, Fresno State economist.
The prices-paid index, which tracks the cost of purchased raw materials and supplies, slipped to 67.6 from July’s 68.6, indicating modest inflationary pressures at the wholesale level. Both the San Joaquin regional wholesale inflation index and the U.S. inflation gauge are elevated. Over the past 12 months, U.S. wholesale prices have expanded by 5.8 percent, the fastest growth since 2009. At the consumer level, the consumer level, the consumer price index advanced by 2.9 percent over the same 12 months.
Looking ahead six months, economic optimism, as captured by the business confidence index, fell to 62.5 from July’s 65.5. Healthy profit growth, still attractive interest rates, and lower taxes boosted business confidence. “However, I expect rising tariffs and trade restrictions to shrink business confidence in the months ahead,” Goss said.
The inventory index once again fell below growth neutral. The index, which reflects the growth or decline in supplies of raw materials, and the other inputs fell to 45.3 from 47.2 in July.
The new export orders fell to 49.9 from July’s 55.4, while the import index sank to 44.9 from 499.8 in July. Almost one in four businesses — or 23.8 percent — indicated that tariffs and trade battles were having negative impacts on sales to, and purchase from, abroad.
Despite negative fallout from tariffs, more than six out of 10 businesses support either raising tariffs or leaving current China trade tariffs in place.
Other components of the August Business Conditions Index were: new orders down to 59.5 from 63.7 in July; production sales down to 61.3 from 65.1; and delivery time up to 54.5 from 54.1.