Regional business index nudges higher in June

SALT LAKE CITY — The Mountain States' economy is solidly in the growth range, but unknowns continue to figure big in the immediate future, according to the region's Business Conditions Index released Thursday.

The overall index inched up to 58.3 in June from 57.9 in May on the Goss Institute for Economic Research's scale of economic conditions in Utah, Colorado and Wyoming. An index greater than 50 indicates an expansionary economy over the next three to six months.

For Utah alone, the state's business index number slipped to 57.9 in June from May's 59.4.

Ernie Goss, research director for the institute, wrote in his report that, since the beginning of the recession, Utah has lost more than 77,000 jobs.

"The state began adding jobs early this year," he wrote. "Based on the recovery from the 2001 recession and the current economic expansion under way, I expect the state to fully reclaim the lost jobs by January 2012."

Weakness in the three-state region's consumer sector, which is directly linked to the continued high rate of unemployment, is holding steady, Goss wrote. However, reports from manufacturers and value-added service companies "over the past several months signal very positive growth for the regional economy into the fourth quarter of this year."

The deficit problems in the European Union have increased the value of the dollar and made U.S. manufactured goods and farm products less competitive abroad, he wrote. "However, this negative impact has been more than offset by the domestic expansion driven by inventory restocking."

The survey's June employment index rose to 56.7 from May's 54.2 and April's 54.8. Even as the hiring picture has improved, the pay outlook has not.

"The region has been adding jobs over the past several months," Goss wrote. "Even though the region will continue to add jobs, I expect unemployment rates for each of the three states in the region to remain at elevated levels as firms remain overly cautious about hiring new workers."

For for the 12th time in the past 13 months, rebounding prices have accompanied the regional economic improvements. The prices-paid index, which tracks the cost of raw materials and supplies, advanced to 76.0 from May's 72.4.

Also for the 12th time in the past 13 months, the regional inflation gauge has climbed above growth neutral.

Record-low interest rates from the Federal Reserve, combined with record federal government deficit spending, "are creating price bubbles in various commodities and will, in my judgment, ultimately contribute to inflationary pressures at the consumer level — above the Fed's goal of 1.75 percent to 2 percent. Even so, I do not think the Fed will begin raising interest rates before the last quarter of this year," Goss wrote.

Looking ahead six months, economic optimism, captured by the June confidence index, dropped to 55.4 from 58.7 in May.

Goss noted that June was the seventh straight month of inventory restocking after more than one year of inventory reductions. The growth in inventories has been a positive and significant factor pushing the regional economy higher, he wrote.

"However, we need to see an increase in the pace of consumer buying before we can be assured that the economy will not dip back into a recession," he wrote, adding, "inventory buildups are not the basis for sustained economic growth."

e-mail: jthalman@desnews.com