Utah's home building industry is
- The number of new residential construction
permits has fallen from a peak of 28,285 in 2005 to a
projected 11,000 in 2008.
employment has fallen by 13,400 in October of
Percent Decline in Residential Building
Permits 2005 - 2008
Source: Bureau of Economic and Business
Research, October 2008.
Percent Decline in Residential Building
Permits 2005 - 2008
|City||Permits Issued Jan - Sept
07||Permits Issued Jan - Sept
Source: Bureau of Economic and Business
Research, October 2008.
Handicapping the Energy Shift
Energy prices are extraor¬dinarily volatile.
Politicians raise alarms about the security of foreign
oil and gas supplies. Scientists warn of irreversible
damage to the earth from the uncontrolled use of
fossil fuels. Welcome to the late 1970s.
For anyone who remembers that time, the crisis
atmosphere surrounding energy today evokes more
than a little déjà vu. But back then, there was a gradual
return to normalcy as prices set by the Organization of
the Petroleum Exporting Countries (OPEC) fell and the
Now, several factors make the energy outlook
different from what it was then: global climate change,
energy insecurity, and growing worldwide demand. A
soft landing won't occur this time without an
unprecedented energy shift - a shift away from the
carbon-intense fuels and technologies of the past.
Life during an energy shift is tense, and for good
reason: The forces that determine how quickly it can
be accomplished are difficult to see clearly. One way
to understand the options is to examine some of the
persistent myths about energy, and the constituencies
that benefit from their promulgation. These myths are
relevant because they can drive public opinion, - and,
hence, public pol¬icy - and because business
practices may also be based on them, which in some
cases can lead to severe competitive disadvantage.
- The Peak Oil Myth: The world is
running out of oil.
Reality This myth has become popular
among some environ¬mentalists and others who
hope to promote alternative energy and conservation.
It has also been popularized by an ongoing argument,
based on some supply estimates, that the world has
passed the maximum global petroleum production
Although a tempting notion, that scenario is not
true. Despite the current imbalance between supply
and demand in oil and other fossil fuels, long-term
supplies will be available. Existing reserves still hold
plenty of fossil fuels, and new reserves continue to be
discovered in regions such as Central Asia and South
America. There are also vast proven reserves
of "nonconventional oil," derived from tar sands, oil
shale, and even coal. Using known technology, these
could provide enough hydrocarbons to fuel a
petroleum-based economy for many decades to come.
However, in one sense, the "peak oil" argument is
right. Nonconventional oil sources are expensive, and
also likely to prove un¬acceptable from an
environmental perspective unless costly new
technologies are deployed to limit greenhouse gas
emissions. Therefore, although oil will remain
abundant, it will not necessarily be easy to retrieve in
the near future, and basing the drivers of industrial
society on oil will not be sustainable beyond, probably,
the next 35 years.
- The China Myth: Rising prices are all
Reality: This myth has gained currency
because it makes it easier for people in the West to
ignore their own role in boosting energy prices.
Instead, it focuses all the blame on the newly
industrializing nations of Asia. It is true to some extent
that growth in energy de¬mand in China, India, and
other developing nations has been a major factor in
rising prices. Mainstream forecasts project that energy
de¬mand in emerging Asian countries will more than
double over the next 30 years. But the whole truth is
more complicated. For one thing, price pressures can
just as easily be blamed on growing energy demand
in the de¬veloped world. In the past 10 years, energy
usage in North America, for instance, has increased
as much as it has in China.
Demand is only part of the price equation. Prices
remained low during the 1980s and 1990s because
oil production from nations outside OPEC - drilling in
areas including Alaska, the North Sea, and Russia -
grew steadily. Non-OPEC production, however, began
to decline in 2002. Since then, the OPEC producers
that control the most economical and easily
recoverable oil and gas reserves in the Middle East
have been straining to increase their capacity to
produce more oil, but have not been able - or
willing - to keep pace with demand. More broadly, the
supply crunch has extended across the energy
spectrum. The costs of providing other forms of
energy have climbed in recent years owing to a
dramatic rise in the cost of production equipment
such as coal mining ma¬chinery, re¬finery vessels,
and infrastructure of all kinds.
- The Easy Ethanol Myth: Biofuels are the
green solution for transportation.
Reality: This myth is promoted by those in the
agriculture sector that stand to benefit from biofuels
development, and it is also an at¬tractive story for
environmentalists. But the "first generation" biofuels
available today are at best neutral, and in some cases
harmful, from an environmental perspective, once the
climate-change effects of land use are factored in.
Biofuels are also implicated in food shortages, though
the extent of their effect is uncertain. Even the next
generation of biofuels under development in 2008
may not be a major improvement. With enough
technological development, future biofuel
ap¬proaches, such as algae-derived fuels that don't
require large amounts of land, may prove to be a truly
green solution, but many obstacles stand in the way,
and development is going to take a long time.
Continued Next Week
Source: strategy+business - published by the
global commercial consulting firm Booz & Company.
THIS WEEKS LEADS:
- Sherwin Williams
- The Sherwin Williams Co. (Southwest Division)
trades as Sherwin Williams at 3,300 locations
- The stores, offering paint, supplies
and related products, occupy spaces of 5,000 sq.ft. in
Utah Home Building
- Approaching the worst in Utah history.
- Permits down 61%
- High Growth Cities hit hardest
- St George
employment down 13,400
- Residential Construction peaked in September
- How much longer will it last?
Source: University of Utah Bureau of Economic
and Business Research, November 2008
- International Business Confidence
- Global business sentiment is as dark as it has
ever been, although the free fall in confidence may be
over; the survey results have been broadly unchanged
since early November. Pessimism is pervasive
across the entire globe, with the only distinction being
that Asian businesses are somewhat less nervous
than elsewhere. Equipment and software investment
did fall last week to a new record low, as did demand
for office space and sales strength. Pricing pressures
are falling rapidly, although they are not yet consistent
with outright deflation. The global economy is
suffering a severe recession according to the
business confidence survey results.
- The Conference Board Consumer
- The Conference Board index of consumer
confidence bounced back modestly in November from
its record-low October reading. The index rose to 44.9
from October's 38.8 (upwardly revised from 38). The
expectations component was responsible for the
rebound, rising to 46.7 from 35.7. The present
situation fell to 42.2 from 43.5. Assessments of
current labor market conditions continued to
deteriorate, although expectations reversed some of
- There was a small downward revision to GDP in
the second quarter. Real GDP fell 0.5% at an
annualized rate in the third quarter, according to
Tuesday's preliminary report; in the advance release
in October, the reported decline was 0.3%. There were
downward revisions to consumer spending and
exports; these were somewhat offset by an upward
revision to inventory investment and a downward
revision to imports. Profits from current production
saw a small decline in the third quarter. Profits have
declined for five straight quarters, and in seven of the
last eight quarters. The U.S. economy is in recession,
and will continue to contract well into 2009.
- Personal income rose 0.3% in October, more than
expected, after increasing 0.1% in September. Income
growth was lifted modestly by hurricane adjustments,
which reduced income in September. Wage growth
was positive but very weak, despite the large job loss
in the month. Spending fell 1% after falling 0.3% the
prior month, also in line with expectations. Real
spending fell 0.5%, its fifth consecutive decline. The
core PCE deflator was unchanged while the top-line
deflator fell 0.6%. The saving rate rose to 2.4% from
1% in September.
- Durable Goods (Advance)
- New orders for manufactured durable goods
declined 6.2% in October following a 0.2% decline in
September and a larger decline in August. Excluding
transportation orders fell 4.4%. Shipments were down
2.4%, marking the third consecutive monthly decline.
New orders for core capital goods fell 4% and
shipments were down 2.4%. The October report
reflects a severe retrenchment in factory activity.
- Case-Shiller Monthly Home Price Indices
- House prices fell at a quicker rate in September
than during August. The 10-city index declined 18.6%
from a year ago in September. Over the same period,
the 20-city index fell 17.4%. House price declines
were broad-based, as all 20 metro areas tracked by
the index registered declines in house prices over the
- FHFA Purchase-Only House Price Index
- The FHFA purchase-only house price index (now
released by the Federal Housing Financial Agency
rather than OFHEO) fell by 1.3% in September, a
decrease of 7.0% compared with September 2007.
The rate of house price decline measured by the index
is accelerating and indicates that the U.S. housing
market as a whole is still some distance away from
finding a price bottom, even though sales have
remained level in the last months.
- Existing-Home Sales
- October existing-home sales indicate that markets
continue to feel the effects of mortgage credit quality
problems that are causing a flood of distressed
homes to hit the market. Sales and inventories are
about flat, while house prices are falling. In October,
existing-home sales fell 3.1% m/m to 4.98 million
annualized units, but this pace is close to where sales
have been treading for the last year. Inventories are
also about flat, with 10 months of available supply.
The decline in house prices accelerated to an 11% y/y
- Jobless Claims
- Initial claims for unemployment insurance
decreased 14,000 for the week ending November 22.
This was a move below expectations. Although a
decrease, initial claims still remain very elevated and
suggest a labor market under stress.
- New Home Sales (C25)
- New single-family home sales fell 5.3% to an
annualized pace of 433,000 in October, and there
were net downward revisions of 17,000 to prior
months. The main positive in this report was that
builders are still slashing inventories at a rapid pace.
Intense financial problems and a weakening economy
will continue to weigh on housing demand, but a
policy-engineered decline in mortgage rates raises
the possibility that sales could start to recover
sometime in the first part of next year.
- MBA Mortgage Applications Survey
- In the week ending November 21, the MBA
composite market index rose slightly to 404.4 in a
week that also saw mixed results in the refinance and
purchase indices. The market index increased 1.5%,
underlined by a decrease in the refinance index. The
refinance index fell 2.1%. The only sizable change
occurred in the purchase index, which increased 5.3%
but still remains at a historic low.
- Chain Store Sales
- Chain store sales fell 0.9% in the week ending
November 22. Year-over-year growth fell to -0.8%, the
second year-ago decline in the index since April 2003
and the largest since February of that year. The ICSC
noted that the benefit to sales from lower gasoline
prices was being offset by rising unemployment, but
holiday sales appear to be delayed this year.
- Oil and Gas Inventories
- Crude oil inventories rose by 7.3 million barrels
during the week ending November 21, according to
the Energy Information Administration. Gasoline
inventories rose by 1.9 million barrels. Distillate
supplies declined by 0.2 million barrels. Refinery
operating capacity jumped to 86.2% from 84.9%. Total
domestic petroleum demand rose strongly from the
prior week. This mixed report points to moderately
higher oil prices.
- Natural Gas Storage Report
- Working gas in underground storage decreased
by 66 billion cubic feet during the week ending
November 21. The consensus estimate was for a
draw of 44 billion cubic feet
|BONNEVILLE RESEARCH - Working with clients to make things happen!
Bonneville Research is a Utah-based
consulting firm providing economic, financial, market
and policy research to public and private sector clients
throughout the intermountain west.
Helping Clients Succeed
Our services include:
- Financial Analysis
- Business License Studies
- Impact Fee analysis
- Urban Renewal & Redevelopment
Analysis and Budgets
- Strategy and Policy Analysis
- Economic and Fiscal Impact Analysis
- Statistical and Survey Research
- Public Sector Mission
Each of our studies is tailored to address
unique needs of our clients and their
Successful client work requires a
superior team of
outstanding people working fluidly together.
Bonneville Research is the one firm with
the experience and expertise to help
governments and nonprofit organizations
We work to help clients achieve enduring
and improve the communities in which we
If we can help, please call or email us at: