Valley economic index reaches highest level in 6 months, points to healthy growth
FRESNO — The economy is breaking through the record books with every economic update. And as of late the San Joaquin Valley Business Conditions Index rose in June, remaining above growth neutral for the 22nd consecutive month and pointing to healthy growth in the next three to six months.
The June index was at 58.6, rising from May’s 56.9. An index greater than 50 indicates an expansionary economy.
“Both durable and non-durable goods manufacturing reported solid gains for the month,” said Dr. Ernie Goss, research faculty with the Craig School of Business at Fresno State. “Food processing continues to be a major contributor to regional growth. As in recent months, construction and wholesale trade activity in the San Joaquin Valley continued to expand at a healthy pace.”
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.
Employment: The employment gauge moved higher to 59.1 from 54.7 in May. “The San Joaquin region has experienced strong job growth at 2.5 percent over the past year, or significantly above the nation’s 1.5 percent expansion over the same period of time. I expect the region to continue to add jobs, but at a somewhat slower pace for the next three to six months,” Goss said.
Wholesale prices: The prices-paid index, which tracks the cost of purchased raw materials and supplies, slipped to a still inflationary 71.5 from May’s 74.2 indicating elevated inflationary pressures at the wholesale level. “I expect rising tariffs, trade restrictions and higher oil prices to continue to boost wholesale and consumer inflation growth above the Federal Reserve’s target. This trend has already pushed consumer inflation higher. “As a result, in my judgment, the Federal Reserve’s interest rate setting committee will raise short-term interest rates by one-quarter of one percentage point (25 basis points) no later than Sept. 26,” Goss said.
Business confidence: Looking ahead six months, economic optimism, as captured by the business confidence index, advanced to a robust 70.5 from May’s 69.9. “Healthy profit growth and still low interest rates boosted business confidence. However, I expect rising tariffs and trade restriction to shrink business confidence in the months ahead,” Goss said.
Inventories: The inventory index once again sits below growth neutral for June. The index, which reflects the growth or decline in raw materials and supplies, climbed to 47.0 from 44.0 in May.
Trade: The new export orders index climbed to 50.8 from May’s 43.9, while the import index slipped to a solid 55.2 from 56.3 in May. “The expanding regional economy is supporting international purchases from regional businesses,” Goss said.
Other components: Other components of the June Business Conditions Index were: new orders at 66.0, up from 64.1 in May; production or sales at 65.0, up from May’s 64.2; and delivery lead time at 55.7, down from last month’s 57.8.
For more information, contact Goss at 559-278-2352.