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.
With the Commerce Department using fourth quarter numbers to project a sound 5.7% increase in GDP, many onlookers were pleasantly surprised to see the actual numbers slightly higher at 5.9%. It was still the fastest pace since the third quarter of 2003. In the third quarter alone the economy increased by another 2.2%. Rewinding time to the 2003 numbers would definitely help the Boise real estate market.
In the winter period the GDP posted fore-casted growth of 5.7%, which indicates goods and services production totals, according to Reuters. 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. With inventory at a recent high, many businesses took advantage of the slowdown to get rid of inventory and purchase needed software and equipment which lifted 4th quarter numbers, despite reduced consumer spending and real estate numbers. 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 values were adjusted down from $33.5 billion initially, to $16.9 in the fourth 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. Such a dramatic increase has not been seen since the final quarter of 1987. With so many suppliers eliminating excess inventory, builders in the Boise real estate market were helped out.
For the whole of 2009, the economy contracted 2.4%, the biggest decline since 1946, the department said. Even consumer spending projections had to be adjusted downward from 2% in January to the actual number of 1.7% increase. In the preceding quarter, the federal government “cash for clunkers” program lifted GDP by 2.8%, which was obviously a short term fix for a sector of the economy. 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. As the national economy contracted, the Boise real estate market contracted right along with it.
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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