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. 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. The latest numbers reflect the most rapid pace since midyear of 2003. In the third quarter alone the economy increased by another 2.2%. Adding these contributing factors in with local ones, will help stabilize the Boise real estate market.
The economy in the winter time frame posted a 5.7% rate of growth, including all goods and services sold inside the borders of the U.S., 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. 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. As the nation goes, so goes Boise real estate.
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. With inventory figures nearly halved, from $33.5 billion to $16.9 billion, the fourth quarter tailed off considerably. They dropped $139.2 billion in the July-September period. The change in inventories alone added 3.88 percentage points to GDP in the last quarter. Such a dramatic increase has not been seen since the final quarter of 1987. As home materials companies liquidated inventory, Boise real estate reaped some benefit from that.
Not since the U.S. economy was recovering from World War II, in 1946, has it experienced the substantial drop in GDP of 2.4%. Even consumer spending projections had to be adjusted downward from 2% in January to the actual number of 1.7% increase. 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. 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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