Valley economic index shows advances in November
December 4, 2017
• But Fresno State’s survey tracks weakness among non-durable goods producers
• “The San Joaquin Valley region has experienced strong but slowing job growth”
The economy of the four-county heart of the San Joaquin Valley is showing an uptick, according to a report from Fresno State University.
Its “Business Conditions Index” in November advanced to 59.0 from October’s 58.2 — a range that points to strong growth. An index greater than 50.0 indicates an expansionary economy over 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.
Since bottoming out in August 2016, the index has moved into a range indicating healthy economic growth ahead.
“This is the 15th 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. “For a second consecutive month, the survey tracked weakness among non-durable goods producers, including food processors, in the region. However, gains for durable goods manufacturers more than offset this weakness.”
Here is Fresno State’s analysis for the components making up its index:
• Employment: After moving below growth neutral for December 2016, the employment gauge has climbed above the threshold every month since. The November index declined to a solid 50.1 from 53.8 in October. “Over the past 12 months, the San Joaquin Valley region has experienced strong but slowing job growth at 1.9 percent, which is significantly above the nation’s 1.4 percent gain for the same period of time,” Mr. Goss says.
• Wholesale Prices: The prices-paid index, which tracks the cost of purchased raw materials and supplies, expanded to 75.0 from 73.1 in October, 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 at their meetings this month,” Mr. Goss says.
• Business Confidence: Looking ahead six months, economic optimism, as captured by the business confidence index, declined to a 61.6 from October’s 66.5.
• Inventories: In another show of economic confidence, the inventory index remained above growth neutral for November. The November inventory advanced to 62.6 from 59.5 in November.
• Trade: The new export orders index slipped to 30.0 from 51.0 in October while the import index rose to 64.3 from October’s 52.2.
• Other components: Other components of the November Business Conditions Index were: new orders at 50.0, down from 59.0 in October; production or sales at 66.7, up from October’s 63.3; and delivery lead time at 65.5, up from last month’s 52.3.