Utah business conditions slip slightly

Utah business conditions slip slightly

Deseret News
Published: Monday, Feb. 1, 2010 8:46 p.m. MST

Utah's business conditions slipped in January but remained above a level deemed to be in expansion mode, according to a monthly gauge released Monday.

The Business Conditions Index, compiled by the Goss Institute for Economic Research, was at 52.7 in January, down from December's 55.0.

The index ranges from zero to 100, with a figure over 50 indicating an expansionary economy over the next three to six months. Utah's index is based on a survey of purchasing managers.

Components of Utah's overall figure were new orders at 58.5, production or sales at 60.1, delivery lead time at 42.3, inventories at 57.2 and employment at 45.5.

"Manufacturing in Utah has not improved as significantly as in Colorado," Ernie Goss, director of the institute and the Creighton University Economic Forecasting Group, said in a prepared statement. "Expansions in new orders and production for the month failed to generate job gains for durable and non-durable producers. I do expect job gains in the months ahead, however."

Utah is part of a Mountain States region that saw its index move down to 55.6 in January from December's 59.1. It was 55.4 in November.

Colorado's index in January was 56.2 from December's 62.8. Wyoming's fell to 62.8 from December's 64.4.

The Goss institute uses the same methodology as a national index compiled by the Institute for Supply Management. That organization on Monday said its national index, which it considers a gauge of the manufacturing sector, read 58.4 in January, compared with 54.9 in December.

It was the sixth straight month of expansion and its highest level since 2004. Analysts polled by Thomson Reuters had expected a level of 55.5.

Manufacturing activity has become a pocket of strength in the economy, though some of it flows from temporary factors such as customers needing to add to depleted stockpiles of goods. New orders, a sign of future growth, jumped in January to its highest level since 2004. So did current production. Order backlogs grew, along with prices companies paid. Thirteen of 18 industries said they were expanding, led by the apparel, textile mills and machinery sectors.

China's manufacturing also expanded in January, and the outlook was positive despite government efforts to cool inflation by tightening control over bank lending, two surveys showed Monday.

U.S. manufacturers have been pumping up production to feed their customers' depleted stockpiles. The ISM said manufacturers' inventories contracted at a slower rate in January. Still, their customers' stockpiles fell to an all-time low.

As their customers try to restock their shelves, manufacturers need to ramp up production to match their demands. That could mean hiring more workers, which would help invigorate the economic rebound. ISM's employment measure grew last month.

"Production growth is finally beginning to tax existing work forces to the point where companies need to expand employment, and, critically, have enough confidence to do so," said Pierre Ellis of Decision Economics.

AK Steel Holding Corp. said in January that it had hired some new employees as production increased to about 85 percent of capacity, compared with 45 percent six months earlier.

Still, companies aren't hiring at a rate anywhere near enough to replace the more than 7 million jobs lost during the recession. The manufacturing sector has lost 2.1 million jobs.

"We're just not going to recapture those," said Wells Fargo chief economist John Silvia.

Companies that laid off workers in the past are being cautious about rehiring, even as their business improves.

Raj Batra, president of a unit of Siemens USA that helps update industrial corporations' equipment and software, said more of his customers are interested in modernizing their factories. Still, he doesn't plan to rehire laid-off employees.

"We still have ample capacity," Batra said. If necessary to meet demand, he said he plans to use contract workers but doesn't expect to add to full-time payrolls anytime soon.

e-mail: bwallace@desnews.com
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