Valley economic index points to solid growth; many businesses expected to add jobs

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 19th straight month that the overall index has moved above growth neutral,” said Dr. Ernie Goss, research faculty with the Craig School of Business at Fresno State. “Both durable and non-durable goods manufacturing reported solid gains for the month. 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. I expect this pace to remain strong for the next three to six months.”

Employment: After two straight months of below growth neural readings, the employment gauge moved to 50.6 for March from February’s 40.7. “Despite the downturn in our survey, the San Joaquin region has experienced strong job growth at 3.3 percent over the past 12 months, or more than double 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, declined for a second consecutive month to 77.1 from 77.8 in February, but it indicated elevated inflationary pressures at the wholesale level. “I expect inflationary pressures at both the consumer and wholesale level to rise in the months ahead. Moreover, I expect the Federal Reserve to raise short-term interest rates at its May 2 meeting by one-quarter of one percentage point (25 basis points),” Goss said.  

Business Confidence: Looking ahead six months, economic optimism, as captured by the business confidence index, advanced to a vigorous 69.3 from a robust 66.4 in February.

Inventories: In another show of economic confidence, the inventory index remained above growth neutral for March. The March inventory expanded to a solid 55.5 from February’s 54.4 indicating growth in inventories and at a faster pace than for February.

Trade: The new export orders index sank to an even weaker 46.0 from February’s 47.5, while the import index fell to 52.8 from 61.2 in February.

Other components: Other components of the March Business Conditions Index were: new orders at 51.9, up from 45.5 in February; production or sales at 51.6, up from 50.5 in February; and delivery lead time at 57.8 down from last month’s 58.9.

For more information, contact Goss at 559.278.2352.