California’s Economy Is Proving Remarkably Resilient
Posted Nov 17, 2007 @ 12:23 pm, Viewed by 376 Visitors, Read 381 Times.
When you think of California's economy today one of the first thoughts to come to mind is the collapsing housing market. California was one of the biggest participants in the housing boom and is now seeing the backside of that.
Home sales are plummeting and prices are falling in many metro areas. The broader economy is assumed to be following the same route. Fortunately, it is not. Overall job growth is holding up relatively well and the Golden States Gross Domestic Product is still expanding. We estimate that California's real GDP grew at a 2.8 percent annual rate during the third quarter and rose 3.7 percent over the past year.
Not only has overall growth held up relatively well to date but we expect the economy to continue to post solid gains over the next couple of years. The weakness in the housing market is impacting consumer spending. Sales of motor vehicles have weakened much more in California than they have in the rest of the country. Sales are also off sharply at furniture stores and home improvement centers. Despite these declines, overall retail sales are still growing, reflecting solid income gains and a growth in tourism.
Once home construction bottoms out, economic growth will gradually pick back up, reflecting solid gains in international trade and the states large high technology sectors. We should see more balanced growth toward the end of the decade, with growth in business fixed investment helping drive output in the states IT equipment and software industries. The growing interest in green technologies is rapidly emerging as another key competitive advantage for California and could contribute meaningfully to growth in coming years.
While we expect conditions to gradually improve, the economic environment remains extremely challenging in California. High housing costs and rising energy bills are nudging many businesses and residents to neighboring states and, increasingly, to points even further out. Overall population growth has slowed significantly and will likely remain sluggish over the next few years. Slower population growth means that it will take longer to clear out the excess inventories of new homes currently on the market. A correction is underway, however, and we believe that the most painful part will be in the next few quarters. Full Article
Home sales are plummeting and prices are falling in many metro areas. The broader economy is assumed to be following the same route. Fortunately, it is not. Overall job growth is holding up relatively well and the Golden States Gross Domestic Product is still expanding. We estimate that California's real GDP grew at a 2.8 percent annual rate during the third quarter and rose 3.7 percent over the past year.
Not only has overall growth held up relatively well to date but we expect the economy to continue to post solid gains over the next couple of years. The weakness in the housing market is impacting consumer spending. Sales of motor vehicles have weakened much more in California than they have in the rest of the country. Sales are also off sharply at furniture stores and home improvement centers. Despite these declines, overall retail sales are still growing, reflecting solid income gains and a growth in tourism.
Once home construction bottoms out, economic growth will gradually pick back up, reflecting solid gains in international trade and the states large high technology sectors. We should see more balanced growth toward the end of the decade, with growth in business fixed investment helping drive output in the states IT equipment and software industries. The growing interest in green technologies is rapidly emerging as another key competitive advantage for California and could contribute meaningfully to growth in coming years.
While we expect conditions to gradually improve, the economic environment remains extremely challenging in California. High housing costs and rising energy bills are nudging many businesses and residents to neighboring states and, increasingly, to points even further out. Overall population growth has slowed significantly and will likely remain sluggish over the next few years. Slower population growth means that it will take longer to clear out the excess inventories of new homes currently on the market. A correction is underway, however, and we believe that the most painful part will be in the next few quarters. Full Article
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