How GDP May Propel Boise Real Estate
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. Based on this good news, the Boise real estate market will be buoyed by the gains in economy.
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. Posting an impressive 2.2% increase, the third quarter led all to date. If we go back to the 2003 number the Boise real estate market would be on solid footing.
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. 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. 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. Being part of the fabric of the national economy, Boise real estate definitely had similar results.
Demand remains low as indicated by the reduction in actual growth of 1.9% from the projected growth of 2.2%, which reduced inventories and brought some balance back. Inventory values were adjusted down from $33.5 billion initially, to $16.9 in the fourth quarter. They dropped $139.2 billion in the July-September period. The Gross Domestic Product was increased by 3.88% simply by the difference in inventory in that quarter. This was the biggest percentage contribution since the fourth quarter of 1987. With so many suppliers eliminating excess inventory, builders in the Boise real estate market were helped out.
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. 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%. A huge block of our economy normally comes from consumer spending, around 70%, but in the fourth quarter of 2009 it only added a minuscule 1.23%. In such a financial crisis, the Boise real estate market is not independent of the national trends.
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. Increases in business investment, from a projected 2.9% to a 6.5% actual pace helped out a lot. It had dropped 5.9% over the prior three-month period. With everyone watching the housing markets, projections of 5.7% were down graded to about 5% in the fourth quarter. With growth as high as 18.9%, the third quarter was a busy one. The fourth quarter closed out with imports and exports showing stronger growth than expected, and contributing a .3% gain for the GDP, according to data sources. As GDP indicates our national economic states, Boise real estate eagerly awaits is significant turn around.
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