Analyst: No double-dip recession in California

Analyst: No double-dip recession in California

June 7th, 2012, 11:13 am ? ? posted by Jon Lansner

Veteran Southern California real estate analyst G.U. Krueger adds his commentary on the housing market to this blog in a spot we call ?Thursday Morning Quarterback.? Here?s his latest installment. ?

The Fed?s Beige book, a reading of the nation?s economic tea leaves from the regional level, upgraded business conditions from modest to moderate for the April/May period. Gross domestic product growth in the second quarter probably picked up a bit. Double-dip fears, which have predictably responded lately to the Pavlovian stimuli of euro fears, slowing global growth, and disappointing job growth this spring, are unwarranted.

Normally, the broad list of positive indicators would make economic-cycle meisters ecstatic. They range from modest consumer spending, strong car sales, expanding tourism, slightly better nonfinancial services, strong growth in information technology, improving residential and commercial real estate, expanding energy production, a shortage of qualified workers, to moderate inflationary pressures. The economic recovery is broadening, but before we get too pollyannaish, the US economy is no dynamo.

The Beige Book covers what in Fed speak is the San Francisco District, basically states along the western coast, and Hawaii, Arizona, Idaho, Nevada, and Utah. California?s economy is big and tends to dominate the cycle in the San Francisco District. It may exasperate California conspiracy theorists, who are always looking at the not-so-bright side of the Golden State, that the San Francisco District is described as improving moderately also.

Here is the Fed?s list of improving cyclical indicators:

? ?Price inflation remained quite limited? and energy input prices are coming down.
? Upward wage pressures, a tell-tale sign of budding inflation, are ?quite limited overall?.
? But ?wage and compensation gains remained substantial in various industries and regions for workers with specialized skills in the application of information technology?.
? ?Retail sales grew modestly?, i.e. in department stores, discount chains, and car sales, although conspiracy meisters can go huzzah about a slowing in home furnishings and major appliances.
? ?Demand for business and consumer services rose a bit further.? Sales for business services slowed for accounting, legal, and health care services, but ?sales rose at a modest pace for providers of technology services,? transportation, restaurants, and the tourism industry.
? ?Manufacturing activity rose further? as new orders improved for semiconductors, pharmaceuticals, commercial aircraft and parts, and even steel manufacturers. Conspiracy guys/gals might find solace in the fact that demand ?remained depressed for manufacturers of wood products.?
? Demand for agriculture is robust but energy extraction is mixed good in oil, but bad in natural gas, where prices are dropping. A bubble bursting in the fracking of natural gas?
? ?District home demand improved a bit overall, and demand for commercial real estate picked up slightly.? New and existing home sales are picking up thanks to ?slight improvements in financing availability?? ?Faster sales reduced inventory of available homes, which in turn caused home construction activity to rise slightly?.
? Finally, ?loan demand showed further slight gains overall? ? not terrible, but also nothing to write home about.

In summation, the California economic outlook is kind of beige, i.e. colorless. But there is no double-dip ? just no boom. Some stimulus is beginning to come from real estate in general. All this is good; and not bad.

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