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 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. This is the fastest pace the GDP has grown since the middle of the year in 2003. The economy expanded at a 2.2% annual rate in the third quarter. The Boise real estate market will see some benefit from these increases, plus other local market factors.
Major news agencies had indicated that the latter portion of 2009 posted a projected growth of 5.7%, including a total of all products and services inside United States borders. Not since the Great Depression of the 1930′s has the country seen this bad of a downturn, and it seemed like we were emerging in 2009 with the latter half of that year posting impressive numbers, but that has tailed off quite a bit in the initial months 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.
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. In the final three months of 2009, consumer spending increased at a 1.7% rate, rather than the 2% pace reported in January. 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. In the fourth quarter, consumer spending – which normally accounts for about 70% of U.S. economic activity — contributed 1.23 percentage points to GDP. As the national economy contracted, the Boise real estate market contracted right along with it.
The department confirmed robust spending on equipment and software caused business investment to grow for the first time since second quarter of 2008, despite a drop in spending on commercial real estate. Estimates for business investment came in at 2.9%, but rose dramatically to 6.5%, much higher than expected. In just the three months prior, it had slumped by just under 6%. 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%. 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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