An index measuring San Diego’s economy rose nearly 1 percent in January, marking the third straight monthly gain and the largest one since April.
The Index of Leading Economic Indicators for San Diego County increased 0.9 percent, after prior monthly gains of 0.6 percent in December and 0.4 percent in November, according to a report from the University of San Diego’s Burnham-Moores Center for Real Estate.
The index showed five of the six components increasing led by nearly a 2 percent surge in consumer confidence and a 1 percent gain in the stock prices of local companies. The only component that fell was housing permits issued, which dropped by about a half percent.
Alan Gin, the USD economics professor who compiles the index, said given the data so far, he’s sticking with a forecast this year of positive growth. “Unless there’s some complete disaster somewhere, or the eruption of a major conflict in the Middle East, or some terrorist act, we’ll have a solid year,” Gin said.
While January’s index seems to show the tepid recovery has some real legs, the numbers didn’t reflect a sudden rise in gasoline prices this month that were exceeding $4.34 per gallon on Feb. 29, up from about $4 earlier in the month.
Gin said the price spike last month was the result of a combination of factors: higher per barrel oil due to increasing international tension involving Iran, and the shutting down of a refinery in this state.
If gas continues rising, it could affect the recovery but won’t reverse it completely, Gin said.
Over a Barrel
Dan Seiver, a professor of finance at San Diego State University, agreed with Gin’s assessment. “Rising gas prices are a negative, but I don’t consider them a major negative. They haven’t risen enough to cause major damage to the national and local economy,” he said. “But if the price of crude oil goes to $150 a barrel and gas hits $6 a gallon that would be a serious problem.”
Gin said for every dime increase in the price of gasoline, it results in $8 million to $10 million taken out of the local economy. The rise also causes an increase in the price of other goods and a decline in consumer confidence, which may cause consumers to pull back from spending, he noted.
In addition to the January increases in consumer confidence and stock prices, other parts of the index showing upticks were more want ads, the national economic indicator index, and fewer claims for unemployment insurance.
Building permits got off to a slow start this year when only 212 residential units were authorized, less than half of the number issued in January 2011.
Gin forecast there would be 5,500 to 6,000 permits issued by year-end, mainly for apartments. In 2011, the county issued 5,220 residential permits, up 56 percent from 2010, he said.
Claims for unemployment insurance hit their lowest level since August 2008, while help wanted ads rose for the 13th consecutive month, according to Gin’s report.
Decline in Jobless Rate
The county’s jobless rate in December, the most recent available, was 8.9 percent, down from 9.2 percent in November. Gin thinks the region can generate some 20,000 to 25,000 new jobs this year, and that by year-end the unemployment rate could be “in the low 8 percent range.”
Seiver said the jobs picture likely won’t improve dramatically this year, but is slowly coming down, and could fall by 1 percent.
The rising stock market so far this year is lifting the prices of most local firms, which tend to be smaller and prone to volatile price swings. Year to date as of Feb. 28, the Standard & Poor’s 500 Index is up 9.11 percent while the Dow Jones Industrial Average was up 6.45 percent.
The national economy also demonstrated better growth and a rise in the national index of leading economic indicators in January.
In the fourth quarter of 2011, the national gross domestic product grew 3 percent, above a 2.8 estimate from the federal Commerce Department. Because many companies are expected to trim their inventories in the first quarter, the national GDP is expected to slow to 1.9 percent, according to MarketWatch.