Utah Business Conditions Index worsens to record low

By Brice Wallace, Deseret News

and Marcy Gordon, Associated Press

Published: February 3, 2009

It's a new year, but the same old poor business conditions for Utah's small businesses.

That's the summary for January, according to the Utah Business Conditions Index released Monday by the Goss Institute for Economic Research. The institute said January's figure for Utah fell to a record-low 36.5. The index uses a range from zero to 100, with a figure above 50 indicating an expansionary economy during the next three to six months.

Utah's figure is derived from a survey of supply managers. Utah's 36.5 in January compares with 38.4 in December and 44.4 in November. Components of the overall index are new orders at 37.5, production at 44.4, delivery lead time at 41.7, inventories at 21.5 and employment at 37.6.

"Durable-goods manufacturing firms reported significant declines in January business activities," Ernie Goss, the institute's director, said in a prepared statement. "Pullbacks were especially significant for firms heavily dependent on international sales. The state's unemployment rate has climbed by 1.4 percent over the past year. I expect Utah's seasonally adjusted jobless rate to expand to 5.2 percent by the end of the second quarter of 2009."

The three-state Mountain State region — consisting of Utah, Colorado and Wyoming — saw its index also hit a record low in January, at 31.6. That compares with December's 41.3 and November's 46.2. The January number is "pointing to a deepening recession for the region through the second quarter of 2009, and potentially stretching well into the second half of the year," the institute said.

"For the third straight month, the index dipped below growth neutral. Our survey results and very negative government data point to a significant economic downturn for the region," Goss said. "While growth in the region's large energy sector had helped the area evade the national recession, a weakening manufacturing sector, especially for firms heavily dependent on international sales, has pushed the region firmly into a recession."

Goss said that while the three-state region's employment index was up slightly, it was "still weak."

"In previous months, growth among firms with ties to the region's large energy sector supported the area economy. However, even firms in this sector are experiencing pullbacks in economic activity," he said.

Colorado's index fell to a record low of 30.5 in January, compared with December's 41.5 and November's 44.3. Wyoming's figure also was a record low, at 35.3. That compares with 47.5 in December and 51.4 in November.

The Goss institute uses the same methodology as a national index. That index, also announced Monday, rose in January from a record low but still posted the 12th straight month of contraction amid a global recession.

The Institute for Supply Management, a trade group of purchasing executives, said that its manufacturing index rose to 35.6 in January from an upwardly revised 32.9 in December. The January reading was above the 32.6 that economists surveyed by Thomson Reuters had expected.

While the increase in the index for January showed a significant improvement, "it is still a sign of continuing weakness in the (manufacturing) sector," Norbert Ore, chairman of the institute's manufacturing business survey committee, said in a statement. Executives surveyed said "that it will take a recovery in automobiles and housing for the manufacturing sector to once again prosper."

On a more positive note, Ore said the index continues to show significant deflation of the prices manufacturers must pay for materials, which ultimately should help consumers.

E-mail: bwallace@desnews.com

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