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USD Economic Index Suggests Weak Economy Into 2008

All six measurements of an economic index compiled by a University of San Diego economics professor fell in August, five by more than 1 percent, which could signal the region is headed into a recession.

The USD Index of Leading Economic Indicators for San Diego County dropped 1.4 percent in August, the 16th month in the last 17. But the decline in five out of six components was troubling, said Professor Alan Gin, who compiles the index.

“The last time that all six components were down in a month was in April and May of 2006. But the magnitudes of the changes back then were not as severe as this month’s changes. The outlook for the local economy continues to be for weakness at least through the first half of 2008. An outright downturn is not expected, but the possibility of a recession in the local economy is at its highest point in years,” Gin said.

As it has for all of this year, the area’s housing slump was a major reason behind the declines but the drop in the number of residential building permits was comparatively modest at 0.67 percent.

Far more consequential were greater than 2 percent decreases in the amount of help wanted advertising and the consumer confidence index. This was combined with greater than 1 percent decreases in unemployment insurance claims (increased claims measured as negative), the national economic index and local stock prices.

The local consumer confidence index was at its lowest level since October 2003, and influenced by an abundance of negative news on the area’s deteriorating housing market and worries over the subprime lending problems, according to Gin’s report.

, Mike Allen

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