September 5, 2013

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Business Conditions in Utah Slightly Down in August

By Rachel Madison

September 5, 2013

Business conditions in Utah slightly worsened in August, according to a monthly index released Tuesday.

The Goss Institute for Economic Research said Utah's Business Conditions Index, which ranges from zero to 100, was 54.3 percent in July, but fell to 51.9 percent in August. Although there was a drop, a figure higher than 50 percent on the index indicates an expansionary economy within the subsequent three to six months. The information for the index comes from a monthly survey of the membership of Utah’s Institute for Supply Management.

Components of the Business Conditions Index for August in Utah were new orders at 49.9 percent, production or sales at 51.3 percent, delivery lead time at 53.7 percent, inventories at 54.1 percent and employment at 50.3 percent.

“Durable and non-durable manufacturing firms in [Utah] are growing at a healthy pace, offsetting weaker business conditions among firms tied to agriculture and energy," said Ernie Goss, director of the Goss Institute for Economic Research.

The Mountain States region, which consists of Utah, Wyoming and Colorado, had an index of 53.6 percent in August—a decline from 55.1 percent in July. However, Goss said although the regional index declined for the month, it remains above 50 percent, which indicates positive growth.

“Growth will continue for the remainder of 2013, [but] it will be at a slower pace,” Goss said. “Mining firms and companies supporting this sector are experiencing pullbacks in economic activity. On the other hand, construction activity continues to trend higher and add to overall regional growth.”

Colorado's index climbed to 56.5 percent in August from 54.8 percent in July. Wyoming's index sank to 54.5 percent in August from 55.9 percent in July. 

Other findings during the month of August in the Mountain States region, according to the monthly index, were that the impact of the federal spending sequestration is rising, inflationary pressures at the wholesale level rose briskly, and business confidence moved below 50 percent to 49.4 percent.

“The last six months, we have asked supply managers how the federal spending sequestration was affecting their company,” Goss said. “In the August survey, approximately 57.1 percent of supply managers indicated that the [federal spending sequestration] has had an impact on their company to date. This is up from 38.5 [percent] in July and 30 percent in June. Thus, the negative impacts according to supply managers are rising. [In addition], international political tensions, higher interest rates and global economic weakness cooled economic optimism for August.”

The Goss Institute uses the same methodology as the national index, which is put out by the Institute for Supply Management. The ISM has been formally surveying its membership since 1931 to gauge business conditions. According to the national index, there was an increase of 0.3 percentage points in August to 55.7 percent from July's reading of 55.4 percent. August’s reading was the highest of the year and indicates an expansion in the manufacturing sector for the third consecutive month.

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