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Leading Economic Indicators
Up in January
Note:
The tentative release date for next month’s report is March 27.
February 28, 2012 --
The USD Burnham-Moores Center for Real Estate’s Index of Leading Economic
Indicators for San Diego County rose 0.9 percent in January.
The advance was led by sharp increases in consumer confidence, initial
claims for unemployment insurance, and local stock prices.
Help wanted advertising and the outlook for the national economy were
also up solidly. The only component that
declined in January was building permits.
After a stretch of six months that alternated between advancing and
declining, the USD Index has now put together a modest streak of three straight
up months.
January’s solid advance means that the outlook for the local economy continues
to be positive for most of 2012. One
development that could slow the local economy is the recent surge in gas prices.
Prices usually rise heading into the spring as refineries in California
shift to producing the summer blend of gasoline, but the shutting down of a
refinery combined with a big increase in the price of oil due to tensions with
Iran has caused prices to hit record levels for February.
There are three potential negative consequences of this price increase:
First, consumer buying power is reduced.
For every 10 cent increase in the price of a gallon of gas, $8 - $10
million dollars a month is taken out of the local economy; consumers spend that
much more on gasoline instead of other goods and services.
Second, the prices of other goods
increase due to higher shipping costs.
Finally, consumer confidence is reduced (see below), which could lead to
lower spending and a slowing of the economy.
Highlights:
After increasing by 56 percent in 2011,
residential units authorized by building permits
started 2012 very slowly.
Multi-family units authorized were particularly weak after nearly tripling in
2011. . . For the fourth month in a row, both labor market variables were
positive. January is usually the
highest month of the year for initial claims for
unemployment insurance. When
seasonally adjusted, initial claims hit their lowest level since August 2008.
On the hiring front, help wanted advertising rose for the 13th
straight month and is up more than 20 percent when compared to January 2011. . .
Positive news about the economy, particularly on employment, caused consumer
confidence to surge in January.
But that was before the recent spike in gasoline prices.
It remains to be seen whether confidence can hold up in the wake of the
gas price increase, as there has been a negative correlation between the two
variables in the past. . . Local stock prices matched the rest of the
financial markets and began the year on a strong note.
Many San Diego companies are smaller ones listed on the NASDAQ, which has
been particularly strong so far in 2012. . . The national Index of Leading
Economic Indicators rose for the ninth consecutive month, suggesting
continued growth in the national economy.
While not spectacular, GDP growth is expected to be about 2 – 2.5 percent
for the year, with the national economy expected to add about two million jobs
in 2012.
January’s increase puts the USD Index of Leading Economic
Indicators for San Diego County at 118.1, up from a revised reading of 117.1 in
December. Revised data for local
stock prices, consumer confidence, and the national Index of Leading Economic
Indicators for both November and December led to a revision in the level of the
Index for those months. Also, the
previously reported change of +0.2 percent for November was revised upward to
+0.4 percent. Please visit the
Website address given below to see the revised changes for the individual
components. The values for the USD
Index for the last year are given below:
For more information on the University of San Diego's Index of Leading
Economic Indicators, please contact:
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