Slow but continued economic growth seen for Valley

FRESNO

June 7, 2016 11:14am

•  A slight improvement from April

•  “Economic growth will remain positive but somewhat weaker in the months ahead”

For the 30th consecutive month, the economic indicators measured by Fresno State’s Craig School of Business for its San Joaquin Valley Business Conditions Index continued in May to point toward growth.

The overall index improved in May to 51.2 from 50.4 in April. An index of greater than 50 indicates an expansionary economy over the course of the next three to six months. Readings over the past months point to softer growth over the next three to six months for the region.

“According to our survey results over the last several months, economic growth will remain positive but somewhat weaker in the months ahead,” says Ernie Goss, a faculty researcher at the Craig School who produces the index.

“However, it should be noted that growth for the region has been vigorous exceeding the nation’s growth by a hefty margin over the past year. Manufacturing activity, especially food processor and other durable goods manufacturers and construction, was strong for the month.”

The index is a leading economic indicator from a survey of individuals making company purchasing decisions in the counties of Fresno, Madera, Kings and Tulare. The index uses the same methodology as that of the national Institute for Supply Management.

In the May survey, respondents were asked to name the greatest threat to 2016 economic prospects. Thirty-six percent indicated that finding and hiring qualified workers represented the No. 1 risk to business economic prospects for the rest of the year. Other factors named included rising government regulation (22 percent), U.S. economic weakness (21 percent), global economic weakness (14 percent) and other issues (7 percent).

Other survey findings:

• Employment

The employment index grew to 49.7 from April’s 49.4, but for the second straight month fell below the growth neutral threshold (50.0). “Until the last two months, San Joaquin Valley businesses had been boosting employment at a strong pace. I expect job gains to once again be a part of the economy over the next several months and equal that of the nation. Job gains are likely to escalate for manufacturing and construction in the area,” Mr. Goss says.

• Wholesale prices

The prices-paid index, which tracks the cost of purchased raw materials and supplies, advanced to 54.4 from April’s 51.7. “Just as in other regional surveys and the national survey, Fresno State’s survey over the past many months shows rising, but very modest inflationary pressures at the wholesale level,” says Mr. Goss. Businesses were asked about the impact of a June rate hike. Twenty-nine percent expect a June rate increase to have a negative impact, while 64 percent expect little or no fallout from an interest-rate increase.

• Business Confidence

Looking ahead six months, economic optimism, as captured by the business confidence index, dipped to 45.9 from April’s 48.9. “Weak agriculture commodity prices and global economic weakness continue to weigh on expectations of future economic conditions,” Mr. Goss says.

• Inventories

Businesses shrank inventories of raw materials and supplies for May, with the inventory index plummeting to 49.1 from 59.8 in April.

• Trade

New export orders remained below growth neutral for May. The index increased to 43.8 from April’s even weaker 30.4, and the import index slipped to 48.4 from 53.1 in April.

• Other components

New orders at 51.8, up from April’s 46.4; production or sales at 49.0, up from 44.4 in April; and delivery lead time at 56.4, above last month’s 52.1.

http://www.centralvalleybusinesstimes.com/stories/001/?ID=30675