Index merry this holiday season
As shown in the accompanying graphic, July was a very strong growth month for the local economy and was followed by August and September growth rates that were only slightly less positive. The average weighted growth rate for the seven economic statistics used in my index was 46 percent in July, 25 percent in August and 14 percent in September. May was 17 percent. We haven't seen growth rates like this since the early 1990s. Even the rates of the late 1990s were weaker than recent ones. The decline in growth rates started in 2001 and bottomed in late 2008-early 2009.
I don't expect these strong growth rates to persevere and the forecast for 2012 in the graph is too optimistic. The growth rates in the seven statistics are year-over-year changes and it is unrealistic to expect 20-plus percent growth rates to continue. The currently strong 2011 growth rates are the result of negative growth rates in the second half of 2010, so 2012 growth rates are likely to be closer to zero because of current strength in the economy.
But the bottom line is that our economy is growing again.
The single statistic contributing the most to overall growth rates since July is single-family detached residential housing permits. The increases for July, August and September, respectively, were 71, 26, and 46 percent. The numbers of 2011 permits issued were coming off very low numbers in 2010 caused by the end of federal government stimulation to the housing sector. These large increases in this sector cannot be sustained unless job growth picks up.
The second statistic contributing greatly to our recent growth rate is the dollar amount of construction put in place. The July, August and September percentage increases were 199, 74 and 11 percent, respectively. These increases were probably the result of Stimulus Act dollars working their way through to infrastructure projects and to the recent large increases in apartment construction. Stimulus Act funding is mostly spent but increased apartment construction is likely to continue well into 2012.
The third strongest statistic contributing to our recent growth is the decline in foreclosures and, therefore, a decline in the number of bankruptcies being declared. Bankruptcies are a drag on our economy and any decline in their number is positive for our economy. The monthly year-over-year improvements in this statistic are in the 30-40 percent range.
Retail sales have also been increasing nicely through the July-September period, in the 10 to 18 percent range. This is a strong indicator that holiday season sales should increase at least 10 percent over 2010.
Job growth by place of residence was 1.89 percent in September, indicating that new jobs are being created. This is a strong, positive growth indicator for our economy.
There was also strong growth in motor vehicle registrations in July and August, suggesting that more motor vehicles are being used in our economy than was true for the same months in 2010. New-car sales were also strong during this period.
Nearly all economic indicators are growing in Northern Colorado, boding well for our economy in the short run.
The 2012 election will be very important to the growth of the Northern Colorado and U.S. economies. If the cost-cutters gain control of the White House and Congress, we will double-dip in 2013. If control of the federal government remains divided, we will continue to slide sideways. The European mess could also cause a double-dip in 2012. The next year will clearly determine the direction of our economy through 2018.
John W. Green is a regional economist who compiles the Northern Colorado Business Report's Index of Leading Economic Indicators. He can be reached at email@example.com.
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