Steady growth is predicted for San Diego for the remainder of 2005 and throughout 2006, according to the economic forecast released Aug. 10 by the San Diego Regional Chamber of Commerce.
“Despite a recent downturn in local consumer sentiment, economic fundamentals such as business investment, consumer spending and employment remain strong,” the report found.
The chamber’s Economic Research Bureau forecasts steady growth for the region’s gross regional product of about 6.6 percent in 2005 and 2006.
Other tidbits:
* The recession of 2001 was marked by a profound reduction in business investment, but non-residential investment levels have returned to pre-recession levels. Business investment reached $1.199 trillion in the fourth quarter of 2004, marking a 22.5 percent rise from its three-year low. The resurging business investment pushed annual productivity growth in California above 3.5 percent, incorporating new technologies to make workers more productive.
* Higher productivity should translate into income growth for San Diego workers in 2005 and 2006. Compensation levels should rise to match the worker’s ability to produce more. The Economic Research Bureau anticipates that per capita personal income will reach $40,000 in 2006.
* Increases in San Diegans’ incomes will help to sustain annual consumer spending growth in 2005 and 2006. Consumer spending grew at a very rapid 10 percent between 2003 and 2004. Growth in income and employment should help sustain local spending trends in 2005 and 2006.
* Employment growth should remain relatively flat in 2005 and 2006, with San Diego’s current unemployment rate very close to 4 percent, generally considered by economists to be full employment of the labor market.
* The current home financing trends in San Diego County present a significant concern for the local economy in the long term. As the Federal Open Market Committee continues to raise interest rates, larger and larger portions of the monthly budget for recent home buyers will be needed to avoid default on adjustable rate mortgages.
* Principal payments will start to accrue for local residents who financed with interest-only loans. Alone, these issues could precipitate a rise in the number of foreclosures but, coupled with a downturn in the business cycle, this could result in a local recession longer and deeper than the last.
, Pat Broderick
