Economic Indicators Impacting Boise Real Estate

By Gavin J. King

The U.S. economy grew faster than initially thought in the fourth quarter as businesses drew down inventories at a much slower pace and boosted investment, a government report showed on Friday. As the recession eases Boise real estate will be helped out by the positive news.

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. This is the fastest pace the GDP has grown since the middle of the year in 2003. The fastest quarter was the third quarter which posted a robust 2.2% growth rate. The Boise real estate market will see some benefit from these increases, plus other local market factors.

In the winter period the GDP posted fore-casted growth of 5.7%, which indicates goods and services production totals, according to Reuters. While the economy rebounded strongly in the second half of 2009 from the worst downturn since the 1930s, data so far suggests the rapid rate of acceleration slowed somewhat in the first quarter of 2010. Considering the housing slump and the low consumer confidence reports, businesses continued to reduce inventories to purchase needed software and equipment which all added up to a boost in fourth quarter numbers. All local indicators show that the rates of decrease were similar in the Boise real estate market.

The initial projections for GDP growth indicated a 2.2% increase, but that has been revised down to about 1.9%, with inventory liquidations and lack of demand bringing some balance. Business inventories fell only $16.9 billion in fourth quarter instead of $33.5 billion estimated last month. 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. Since 1987, inventories had not influenced GDP in such a substantial way. A big lift came to the Boise real estate market through the liquidation of these extra inventories by construction companies.

As a whole, the year 2009 featured the most dramatic decrease in GDP, at 2.4%, since the post World War II recovery of 1946. In the final three months of 2009, consumer spending increased at a 1.7% rate, rather than the 2% pace reported in January. Although offset soon afterward, the “cash for clunkers” program drove GDP, by stimulating consumption, up by a respectable 2.8%. The disappointing news came from the consumer spending sector which added only a 1.23% GDP gain, which is low considering it is normally about 70% of GDP. The Boise real estate market has shared in the impact of the national financial crisis.

With spending on commercial real estate heading down quickly, the fact that the growth happened at all was due mostly because of equipment purchases and investment in software necessary for business growth and improvement. Estimates for business investment came in at 2.9%, but rose dramatically to 6.5%, much higher than expected. Posting a decrease in the three month leading up to that, of 5.9%. With everyone watching the housing markets, projections of 5.7% were down graded to about 5% in the fourth quarter. In the third quarter it had posted a tremendous 18.9%. Both exports and imports grew much stronger than initially estimated in the fourth quarter, leaving a trade gap that contributed 0.3 percentage point to GDP growth, the data showed. As GDP indicates our national economic states, Boise real estate eagerly awaits is significant turn around.

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