Economic Indicators Affecting Boise Real Estate
Hopes soared on reports that the recession was coming to a close as the United States economy posted a healthy 5.9% gain and businesses invested to boost GDP. Boise real estate always depends on the national economic trend, so good news will help out.
It was estimated that Gross Domestic Product would increase at a clip of 5.7%, instead it grew at a rate of 5.9% according to the Commerce Department, based on fourth quarter financial numbers. The latest numbers reflect the most rapid pace since midyear of 2003. The fastest quarter was the third quarter which posted a robust 2.2% growth rate. Rewinding time to the 2003 numbers would definitely help the Boise real estate market.
Analysts polled by Reuters had forecast GDP, which measures total goods and services output within U.S. borders, growing at a 5.7% rate in the October-December period. It is looking like the first quarter of 2010 will not continue in the rapid pace of recovery shown throughout 2009, which had posted the most impressive numbers since the worst financial catastrophe since the Great Depression. Even thought consumer spending and the housing markets were down, the fact that businesses increased investment in software and equipment helped add some steadiness to the economy and allowed business to liquidate bloated inventories. This wan’t just a national trend either, as the Boise real estate market saw very similar changes in volume as well.
Stripping out inventories, the economy expanded at an annual rate of 1.9%, rather than the 2.2% pace estimated last month, indicating growth was not being driven by demand. Inventory sales amounts were alarmingly reduced from $33.5 billion to around $16.9 billion in the final quarter. Throughout the latter portion of the summer, inventory sales plummeted to $139 billion. The inventory changes alone were responsible for a 3.88% difference in GDP. This was the biggest percentage contribution since the fourth quarter of 1987. A big lift came to the Boise real estate market through the liquidation of these extra inventories by construction companies.
In fact, since 1946 there not been such a dramatic shrinkage in the economy as the 2.4% drop recently. Toward the end of 2009, consumer spending had to be reduced from the projected 2% to 1.7% in consumer spending. Although offset soon afterward, the “cash for clunkers” program drove GDP, by stimulating consumption, up by a respectable 2.8%. Previously reliable consumer spending levels, usually adding about 70% of GDP, was much lower than normal, adding only 1.23% to the nations GDP. The Boise real estate market has shared in the impact of the national financial crisis.
The fourth quarter GDP numbers increased, despite a slumping commercial real estate market, due to significant investment in software and required equipment by businesses. Estimates for business investment came in at 2.9%, but rose dramatically to 6.5%, much higher than expected. In just the three months prior, it had slumped by just under 6%. With everyone watching the housing markets, projections of 5.7% were down graded to about 5% in the fourth quarter. It had grown at an 18.9% pace in the third quarter. On the back of stronger exports and imports, which left a trade gap adding .3% to the GDP, the fourth quarter boasted better numbers than otherwise anticipated. With GDP factoring in to nearly every facet of business, Boise real estate is not independent.
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