From Deseret News archives:
Utah business index dips
But professor foresees continued 'solid growth'
Utah's business conditions index, based on a January survey of supply managers and business leaders, fell to 59.4, from December's 59.5 but up from November's 58.3, according to a report by Creighton economics professor Ernie Goss.
"Utah's economic growth has been much stronger than the rest of the nation over the past year," Goss wrote in the report. "Utah began 2006 on a strong note, but on a pace somewhat below that of 2005. Food processors and telecommunications firms reported somewhat weaker economic conditions while durable goods producers and natural resources-related firms detailed growing economic activity for the month."
The Creighton index ranges from zero to 100, with a figure over 50 indicating an expansionary economy over the next three to six months. It uses the same methodology as a national survey conducted by the Institute for Supply Management.
For the three Mountain states of Utah, Colorado and Wyoming, the overall business conditions index jumped to 71.9 from December's 65.
"Increases over the past two months point to solid growth into the second quarter of this year," Goss wrote. "However, oil prices, once again approaching $70 per barrel, and higher interest rates will moderate growth, especially in the second half of the year."
The ISM index, also released Wednesday, revealed slower-than-expected manufacturing growth in January. The national index was 54.8 in January versus 55.6 in December and short of the 55.5 expected by analysts.
"Growth is still at a healthy level," said Gary Thayer, chief economist at A.G. Edwards & Sons Inc. "There is no major slowdown."
Thayer said the index illustrates the economy has hit a sweet spot where manufacturing activity is moving along steadily but not briskly enough to warrant concerns about inflation.
However, economist Mark Vitner said he was concerned about what he perceived to be weak spots in the ISM index. He said construction and consumer spending — sectors that have been fueling economic growth — may tumble on higher interest rates, and feared that business spending won't be able to pick up the slack.
Vitner, senior economist at Wachovia Securities, said he was troubled that growth in the new order and employment indexes slowed from Decem- ber.
"Orders tell you what is going to happen a few months out," Vitner said. "The economy has lost its momentum."
With companies spending more to shore up their pension plans ahead of the baby boomer retirement, Vitner said they'll have less to spend on capital improvements and new technology.
Others remained upbeat. Norbert J. Ore, chair of the ISM manufacturing business survey committee, said the manufacturing sector has recovered from the disruptions and dislocations caused by the hurricanes on the Gulf Coast last year.
"I feel good about where we are headed for the year," Ore said.
E-mail: jnii@desnews.com
