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. As the recession eases Boise real estate will be helped out by the positive news.
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.
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.
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.
Businesses continued to invest in equipment and necessary software at such a rate that the commercial real estate slump was not a cause of negative number in the Gross Domestic Product in the fourth quarter. Increases in business investment, from a projected 2.9% to a 6.5% actual pace helped out a lot. In the preceding three months, it had slid by about 5.9%. With an anticipated increase of 5.7% for the fourth quarter, the construction numbers were a bit of a disappointment when they came in at 5%. Posting an increase of just under 19% in the third quarter, there was quite a disparity between quarters. 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 factors that effect Boise real estate and GDP, we are all eager to see a resolution to this crisis.
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