State's business conditions weaken

Utah's Business Conditions Index weakened and moved back below growth-neutral for the month of August, according to a Goss Institute for Economic Research report released Tuesday.

The state's overall index slipped from July's 52.6 to 49.0 but was up significantly from June's 40.3.

The monthly index is based on a survey of the state's supply managers and ranges from zero to 100, with a figure over 50 indicating an expansionary economy over the next three to six months. An index of 50.0 is considered growth neutral.

Components of the overall index for August were new orders at 62.8, production at 56.7, delivery lead time at 47.0, inventories at 36.0 and employment at 42.6.

"The pace of job losses in the state has yet to slow," Ernie Goss, director of the institute and of Creighton University's Economic Forecasting Group, said in a prepared statement.

"The region shed jobs at an annualized rate of roughly 3.5 percent over the past three months, with more than 125,000 jobs lost for 2009," he said. "Based on surveys over the past few months, I expect the pace of job losses to slow in the months ahead even as unemployment rates rise."

After rising above growth-neutral in July, the overall index for the three-state Mountain States region fell below 50.0 for August. The Business Conditions Index slipped to 47.0 from July's 51.5 but remained well above June's "weak" 41.4.

The Creighton Economic Forecasting Group has conducted the monthly survey of supply managers in Colorado, Utah and Wyoming since 1994 to produce leading economic indicators of the Mountain States region.

The Goss institute uses the same methodology as a survey conducted nationally by the Institute for Supply Management. The national figure, also released Tuesday, showed that the U.S. manufacturing sector grew in August for the first time in 19 months, adding to evidence that the recession is ending.

The ISM, a trade group of purchasing executives, said its manufacturing index rose to 52.9 in August, from 48.9 in July. It's the first reading above 50, which indicates expansion, since January 2008. Analysts polled by Thomson Reuters had expected a reading of 50.5.

New orders jumped nearly 10 percentage points to 64.9 in August, their highest level since December 2004. With strong new orders for two straight months, production should grow at "reasonable rates" for the rest of the year, said Norbert Ore, chairman of ISM's manufacturing survey.

The better-than-expected national reading Tuesday showed the highest number for the manufacturing index since June 2007. New customer orders jumped to a level not seen since late 2004.

"Manufacturing will continue to expand," but capital investment will decline because plants have too much excess capacity, Daniel Meckstroth, chief economist for the trade group Manufacturers Alliance, said. "You're going to see ups and downs."

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