National economic growth "strongly suggests" the Federal Reserve will start raising short-term interest rates as early as June, one Utah economist said Tuesday.

Even so, he said, local business conditions remain strong and should continue to gain momentum through 2004.

The Zions Bank Small Business Index for Utah rose to 102.1 in April from a revised 101.9 during the previous month. The index measures business conditions from the viewpoint of the Utah small-business owner or manager. A higher Index number is associated with more favorable business conditions for Utah's small businesses. The index uses 100.0 for calendar year 1997 as its base year.

"Utah's rebound has been fairly impressive," said Jeff Thredgold, economic consultant to Zions Bank and president of Thredgold Economic Associates. "We've gone from basically break-even employment over the last year, and even a slight decline in the last three years, to now suddenly adding nearly 15,000 jobs over the last 12 months. We've seen Utah take advantage of stronger U.S. growth, stronger global growth and a low interest rate environment."

Sometimes, however, good news can seem like bad news, Thredgold said. Such may seem the case with interest rates.

Due in part to 13 short-term interest rate cuts between 2001 and 2003, the U.S. economy has seen "the strongest . . . growth over the past 12 months in 20 years," Thredgold said. That growth, in addition to higher oil prices, has increased concern about inflation, Thredgold said, which likely will prompt the Fed to begin tightening monetary policy this year.

"Financial market players expect the Fed to raise the federal funds rate, now at a 46-year low of 1 percent, by perhaps 0.25 percent in late June, followed by a series of additional 0.25 percent increases over the balance of the year," Thredgold wrote in his report on the index. But, he said, "Even as short-term interest rates likely move higher, they will remain historically low."

There are some who will benefit from the projected increases — namely, people who are living off interest income. And, Thredgold said, "Even if rates move one full percentage point higher, at 2 percent it's still very low. It will help the people who are dependent on interest income or money market income or savings rates income or CDs. But it's not enough of an increase to really punish the borrowers."

Financing costs are a component of the Zions Bank index. The employment environment is another.

The most heavily weighted component of the index — the unemployment rate —was estimated at 5 percent in Utah in March (the most recent local employment data available), up from the prior month's revised 4.7 percent rate. A lower unemployment rate is a negative contributor to the index, because it suggests decreased access to labor.

Total Utah employment rose by an estimated 14,900 jobs over the past 12 months, the strongest gain since 2000, the report stated. In the prior year-over period, there was a gain of 14,500 jobs. Stronger job gains suggest Utahns will have more income and spend more, which has a positive impact on Utah's small businesses and the Zions index.

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E-mail: jnii@desnews.com