December 2007
Rocky Mountain region consumers confident despite national mortgage crisis
Despite the national mortgage crisis driving negative trends in foreclosures, home prices, and building permits, Metro Denver retail sales and Rocky Mountain consumer confidence levels are strong, according to data compiled by the Metro Denver Economic Development Corporation (Metro Denver EDC) in its Monthly Economic Summary for December 2007.
Consumer spending accounts for almost 70 percent of total economic activity, so the usual emphasis on holiday consumer spending is gaining even more attention due to tenuous market conditions. Total retail sales were up nine percent through the eight months ending in August, with the strongest year-to-date gains recorded in Adams (+13.7 percent), Boulder (+12.4 percent), and Broomfield (+12 percent) Counties. Statewide, retail sales were up 9.2 percent through August, more than $7.7 billion ahead of sales from the first eight months of last year.
The Conference Board's Consumer Confidence Index for the Mountain region rebounded from a revised 119.9 in September to 141.8 in October, the highest rating since March of this year. Only two of the remaining eight U.S. regions - the West South Central and Pacific areas - had consumer confidence increases in October. Nationwide, consumer confidence continued to decline.
Along with consumer confidence and spending, Colorado’s competitive edge is also strong. According to Alera Consulting Corporation's State Knowledge Economy Index, Colorado is better positioned to support a knowledge-based economy than many other U.S. states. Colorado ranked fifth overall in the 2007 index, which measures each state's public education system, human capital, and capacity for research and development and innovation. In essence, Colorado’s high rank suggests the state is an attractive location for knowledge-intensive jobs.
"Metro Denver residents' high confidence level perhaps indicates we've seen the worst of our economic challenges behind us," stated Tom Clark, executive vice president of the Metro Denver EDC. "However, this optimism is not as strongly shared by Metro Denver business leaders and we have yet to weather the holiday shopping season."
The Colorado Business Leaders Confidence Index® (BLCI), which measures the expectations of Colorado business leaders for the upcoming quarter, moved into negative territory, however, falling from 55.6 to 47.9 in the fourth quarter. Index values below 50 indicate expectations for decreases.
On a positive note, Metro Denver's real estate market missed the widespread run-up in home sales and prices, so area homeowners and homebuyers may also see a residential recovery sooner than in other regions. Metro Denver existing home sales increased three percent in October, partially reversing a significant slowdown in the prior month. The number of single-family homes sold increased three percent between September and October, and the number of condominium sales increased 2.7 percent.
Metro Denver's industrial real estate market remains resolute. The latest data from CoStar Realty Information, Inc., report Metro Denver’s direct vacancy rate declined to 5.8 percent, the lowest vacancy rate posted since fourth quarter 2001. Average lease rates have risen slightly in a tightening market, and third quarter’s rate was $5.02.
Recent economic data for Metro Denver show seven of 18 indicators moved in a positive direction for the month, down from eight positive changes recorded last month. Twelve of the 18 indicators had positive annual trends changes, the same number of positive changes recorded last month.