Valley economic index dips but remains healthy
November 6, 2017
• Still in a range that points to strong growth ahead
• “This is the 14th straight month that the overall index has moved above growth neutral”
The October San Joaquin Valley Business Conditions Index, compiled by researchers at Fresno State University, fell slightly to 58.2 from a reading of 58.4 in September, but remains in a range that points to strong growth in the next three to six months, the university says.
An index greater than 50.0 indicates an expansionary economy.
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.
“This is the 14th straight month that the overall index has moved above growth neutral,” says Ernie Goss, research faculty with the Craig School of Business at Fresno State. “This month, we tracked weakness among non-durable goods producers, including food processors. However, gains for durable goods manufacturers more than offset this weakness.”
Survey respondents were also asked how the October northern California wildfires would impact their businesses. More than 9 in 10, or 92.9 percent, expect little or no impact on their businesses.
How the components break down
After moving below growth neutral for December 2016, the employment gauge has climbed above the threshold every month since. The October index declined to a solid 53.8 from 54.0 in September. “Over the past 12 months, the San Joaquin region has experienced strong but slowing job growth at 1.3 percent, which is equal to the nation’s 1.3 percent,” Mr. Goss says.
• Wholesale Prices
The prices-paid index, which tracks the cost of purchased raw materials and supplies, slipped to 73.1 from 73.4 in September, 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. As a result, I expect the Federal Reserve to raise short-term interest rates by one-fourth of one percentage point before the end of 2017,” says Mr. Goss.
• Business Confidence
Looking ahead six months, economic optimism, as captured by the business confidence index, declined to a 66.5 from September’s 68.8.
In another show of economic confidence, the inventory index remained above growth neutral for October. The October inventory advanced to 59.5 from 56.5 in September.
The new export orders index slipped to 51.0 from 52.0 in September, while the import index declined to 52.2 from September’s 54.3.
• Other components
Other components of the October Business Conditions Index were: new orders at 59.0, down from 59.7 in September; production or sales at 66.3, up from September’s 63.3; and delivery lead time at 52.3, down from last month’s 58.8.