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Arizona Business Conditions Index turns upward


September 12, 2006

After three months of trending downwards, the Arizona Business Conditions Index began to show improvement once again in August.

The seasonally adjusted Arizona Business Conditions Index rose 6.1 points to reach 60.5 in August from 54.4 in July – an 11.2 percent increase. An Arizona Business Conditions Index reading of over 50 indicates that the local economy is growing, while a reading below 50 suggests a slowdown in the overall level of economic activity in the near term.

"Until August, the index had been approaching the critical 50-point mark, below which a recession would be indicated," said Dawn McLaren, an economist with the Bank One Economic Outlook Center at Arizona State University 's W. P. Carey School of Business. The Arizona Business Conditions Index, which has been published for over 40 years, has accurately predicted every recession with a four- to six-month lead.

Most of the improvement in the overall index came from the purchases component.  

"Purchases have been particularly volatile over the last six months, rising and falling significantly from month to month," McLaren said. "This roller coaster appears to be caused by movement in prices of certain commodities, especially oil. The new orders component also provided a push to the upside for the overall index, rising by 9.2 points."  

"The Price Index fell by 5.3 percent in August, but still remains at the robust level of 72.7, indicating continued upward pressure on prices," McLaren said. "The growth rate of the Price Index increased rapidly in 2003 and has not shown signs of wavering since then. While there have been short respites from large price increases, the overall trend has been staunchly upward."

The Arizona Business Conditions Index is updated monthly and is available on the Web at wpcarey.asu.edu/azbci. The site contains current and past press releases, graphs and historical data.

W. P. Carey School of Business
The L. William Seidman Research Institute in the W. P. Carey School of Business at Arizona State University is an affiliation of six research centers that serves as a link between the local, state, national and international business communities and the creative and intellectual resources of the nationally ranked W. P. Carey School of Business.  For more information please visit www.wpcarey.asu.edu < http://www.wpcarey.asu.edu > .