How GDP May Affect The Boise Real Estate Industry
Businesses increased investment, helping out GDP, and the economy grew at a 5.9% interest helping reinforce the idea that the recession is coming to an end. As goes the nation, so goes the Boise real estate market, so this news is good to local industry insiders.
With Gross Domestic Product growth projected at a satisfying 5.7%, based on Commerce Department data from the 4th quarter, but actually came in at 5.9%, surpassing many expectations. It was still the fastest pace since the third quarter of 2003. The economy expanded at a 2.2% annual rate in the third quarter. Adding these contributing factors in with local ones, will help stabilize 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. With the recovery seemingly in full swing in the last few months of 2009, our nation seemed to be emerging from the most severe financial crisis since the Great Depression, but that growth has been stymied somewhat in the first quarter of 2010. A sharp brake in the pace at which businesses liquidated inventories combined with increased spending on equipment and software to boost growth in the fourth quarter, offsetting lackluster consumer spending and residential investment. This wan’t just a national trend either, as the Boise real estate market saw very similar changes in volume as well.
Growth was projected to be about 2.2%, but has been revised down to about 1.9%, which shows that growth has been due to reduced inventories and not so much a return of market demand. Business inventories fell only $16.9 billion in fourth quarter instead of $33.5 billion estimated last month. They dropped $139.2 billion in the July-September period. 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. As home materials companies liquidated inventory, Boise real estate reaped some benefit from that.
For the whole of 2009, the economy contracted 2.4%, the biggest decline since 1946, the department said. Toward the end of 2009, consumer spending had to be reduced from the projected 2% to 1.7% in consumer spending. That was below the 2.8% rate in the prior quarter when consumption got a boost from the government’s “cash for clunkers” auto purchase program. Previously reliable consumer spending levels, usually adding about 70% of GDP, was much lower than normal, adding only 1.23% to the nations GDP. As the national economy contracted, the Boise real estate market contracted right along with it.
The fourth quarter GDP numbers increased, despite a slumping commercial real estate market, due to significant investment in software and required equipment by businesses. With business investment being much higher than the projected 2.9%, at 6.5% actually, improvement is on the way. In the preceding three months, it had slid by about 5.9%. Spending on new home construction grew at a slower 5% rate in the fourth quarter, instead of 5.7% estimated last month. With growth as high as 18.9%, the third quarter was a busy one. Contributing a .3% increase in GDP, imports and exports were significantly stronger in the fourth quarter than previously anticipated. With GDP factoring in to nearly every facet of business, Boise real estate is not independent.
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