One-third of Valley business owners say trade war is negatively affecting their operations
@TheSunGazette
SAN JOAQUIN VALLEY – Tariffs and inflation caused the San Joaquin Valley’s economy to slow for the third straight month but business confidence remains high.
According to the San Joaquin Valley Business Conditions Index, more business owners say tariffs are negatively affecting their businesses. About one-third of firms reported that tariffs and trade battles were having negative impacts on sales to, and purchases from, abroad as part of the monthly survey produced by the Craig School of Business at Fresno State. The new export orders index fell to 43.1 from August’s 49.9, while the import index sank to 40.6 from 44.9 in August.
“More than one in three businesses, or 34.8 percent, indicated that tariffs and trade battles were having negative impacts on sales to, and purchases from, abroad,” said Dr. Ernie Goss research faculty with the Craig School of Business at Fresno State.
The prices-paid index, which tracks the cost of purchased raw materials and supplies, climbed to 68.5 from August’s 67.6, indicating modest inflationary pressures at the wholesale level.
“I expect rising tariffs, and trade restrictions to continue to boost wholesale and consumer inflation growth above the Federal Reserve’s target,” said Goss. “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) at their meeting on Dec. 19.”
Despite this negative fallout from tariffs, six of 10 (60.9 percent of) businesses supported either raising tariffs or leaving current China trade tariffs in place. Looking ahead six months, economic optimism, as captured by the index, climbed to 62.8 from August’s 62.5. “Healthy profit growth and still attractive interest rates boosted business confidence,” Goss said.
Goss said the Valley’s economy is still growing at 1.8% per month, just above the national pace of 17% per month. The inventory index rose above growth neutral for September. The index, which reflects the growth or decline in raw materials and supplies, increased to 50.6 from 45.3 in August. The employment gauge moved lower to 52.5 from 55.0 in August but should have little effect on the economic growth.
“I expect the region to continue to add jobs, but at a somewhat slower pace for the next three to six months,” Goss said.
Overall, the San Joaquin Valley Business Conditions Index fell in September for the third straight month, but remains above growth neutral for the 25th consecutive month — pointing to slow, healthy growth in the next three to six months. The September index was at 52.9, falling from August’s 55.1. An index greater than 50 indicates an expansionary economy.
“Both durable and non-durable goods manufacturing reported solid gains for the month,” said Goss. “As in recent months, construction activity in the San Joaquin Valley continued to expand at a very healthy pace. I expect this pace to remain strong for the next three to six months.”
Other components: Other components of the September Business Conditions Index were: new orders at 52.0, down from 59.5 in August; production or sales at 53.2, down from August’s 61.3; and delivery lead time at 56.2 up slightly from last month’s 54.5.
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. For more information, contact Goss at (559) 278-2352.
