BR Logo

Monday Report

From Bonneville Research June 22, 2009
Recklessness and Greed
As Utah's recession took its bite over the winter, we became obsessed with finding someone or something to blame. Greedy bankers, addicted to taking risks and paying themselves lavish sums, took much of the flak, as did hapless financial regulators who failed to react to the danger signs and elected officials who believed that because of personal interests and good information, markets would self regulate.

But fingers of blame were also pointed at each other. Utahns had become hooked on material consumption, fuelled by debt and rising house prices we flocked to mortgages which offered loans of up to 125 per cent of a property's value with little regard to the "old three C's (credit, character & cash flow). Our house prices and luxury shopping boomed on the back of big bonuses and broker reports. It was unsustainable and, as economists like to say, things that are unsustainable do not last.

But as Utah starts to enjoy its new sport of spotting the green shoots of spring economic growth (and speculating on whether they will wither), was it all the standard story of consumer boom followed by inevitable comeuppance?  Will we recover to a whole new economy?  Will we recover at all, or slide into a deeper depression?

The following information tells a mixed story - some up, some down!  Generally encouraging however!

Tell us what you think in this weeks Poll.

Bonneville Research Website

Vote in this weeks poll!

A YEAR from now, do you think the Utah economy will be growing or? 

Past Monday Reports are also now available!
Utah Economic Snapshot - First Eleven Months FY2009 YTD
This week we get another look at how the Utah economy has changed in the past eleven (11) months.
Sales and Use Taxes which fund the general state government at higher education are down $167.5 million or 10.4% over last year.
Individual Income Taxes whigh fund Public Education (K-12) are down almost $272.68 million or 8.8% over last year.
Local Government Sales and Use Taxes which include food sales are down $38 million or 8.8%.  This is generally the source of at least 1/3 of most city revenues.

More detail is provided below.
Utah State Government
  • Sales and Use Taxes (Gen Gov't, Higher Education) -10.4%        (-$167.50 M)
  • Individual Income Taxes (Public Education) -10.1% (-$272.68M)
  • Individual Income Tax Withholding (Public Education) -8.8%
  • (-$172.91 M)
  • Corporate Franchise Taxes (Gen Gov't) -33.3% ($116.48 M)
    Motor Fuel Taxes (Transportation) -7.9% (-$18.15 M)
  • Severance Taxes (Gen Gov't) +15.9% (+15.92 M)
  • Total General and Education -11.7% (-$543.07 M)
Source: Utah State Tax Commission, TC-23 6/11/09
Local Government
  • Sales and Use Taxes (includes food) -8.8% (-$38.14 M)
  • Public Transit -10.5 % (-$19.47 M)
  • County Option Sales & Use Tax -7.8% (-$8.49 M)
  • County Option Zoo, Arts & Parks Tax  -13.3% (-$3.88 M)
  • Tourism, Recreation, Cultural, Convention -6.7% (-$2.99 M)
  • Transient Room Tax -10.5% (-$2.69 M)
  • Municipal Telecommunications License -6.1% (-$2.54 M)
  • Emergency Services Phone Charge -5.4%  (-$1.37 M)

Source: Utah State Tax Commission, TC-23 6/11/09

This Weeks
Bonneville Research Poll
A YEAR from now, do you think the Utah economy will be growing or?
Economic Notes: 
Moody's Survey of Business Confidence
Global business sentiment is much improved during the past three months. Most notable is the optimism regarding the economic outlook toward the end of this year. Assessments of current business conditions and the strength of sales have also measurably improved. Confidence is still weak and fragile, however, consistent with an ongoing global recession. Businesses continue to cut jobs and inventories, and pricing remains very soft.

The Conference Board Leading Indicators +1.2%
The index of leading indicators surged in May for a second straight month, supporting the view that the economy is stabilizing. The 1.2% rise was led by stock prices, consumer expectations, the yield curve, and manufacturing supplier delivery times. The index is up 8.4% at an annual rate over the last three months. Not since mid-2004 has the index increased this quickly. 

Risk of Recession 38%
The chance that the U.S. will be in recession in six months inched slightly lower to 38% in May, compared with April's 41%. The risk of recession has steadily declined since November as the recession is showing signs of moderating. New-home construction and vehicle sales appear to have bottomed while financial market conditions are gradually improving. Real GDP is forecast to decline 2.8% at an annual rate in the second quarter, an improvement from the -5.7% in the first three months of the year. The economy will rebound in the second half of this year, but the initial recovery will be slow before gaining momentum in 2011 and 2012.  
Treasury International Capital Flows -$44.2 B

Net long-term TIC flows in April slowed to $11.2 billion from $55.4 billion in March as private foreign investors reduced their net holdings of corporate bonds and foreign official institutions reduced their net holdings of government agency bonds. Foreign investors are still buying up U.S. Treasury bonds and notes, with net purchases still resilient.
Current Account -$101.5 bil
The U.S. current account deficit narrowed by 34.5% to $101.5 billion in the first quarter of 2009, compared with the revised fourth quarter deficit of $154.9 billion. Moody's had expected a much greater narrowing of $86.2 billion, in line with most other forecasters. The trade deficit narrowed to $91.2 billion, while the surplus on income narrowed to $32.8 billion.

Consumer Price Index +0.1%
The top-line CPI increased by 0.1% in May, a hair higher than expectations, and is down by 1% from May 2008. The core CPI also increased by 0.1% in May, a deceleration from April when it increased by 0.3%. The core CPI is now up by 1.8% from May 2008. Energy prices increased by 0.2% for the month as oil and gasoline prices seem to have stabilized, while food prices fell by 0.2%. Although CPI inflation remains positive, May's numbers indicate that the danger of deflation is still present.

Oil and Gas Inventories -3.9 bbl
Crude oil inventories fell by 3.9 million barrels during the week ending June 12, according to the Energy Information Administration, below expectations of a 1.2 million barrel decline. Gasoline inventories rose by 3.4 million barrels, well above expectations of a 550,000 barrel build. Distillate inventories rose by 0.3 million barrels. Refinery operating capacity was unchanged at 85.9%. Total domestic petroleum demand rose modestly. This report supports points of a rise in oil prices.

MBA Mortgage Applications Survey - 15.8%
In the week ending June 12, the MBA market index slipped again, despite a decline in contract rates. The market index fell 15.8% to 514.4. Similarly, both components fell. The purchase index decreased 3.5% to 261.2. Meanwhile, the refinance index continued its quick plummet. Down another 23.3%, the refinance index is now 1,998.1.

Industrial Production: -1.1%
Industrial production fell sharply again in May but, as in April, at a slower pace than earlier in the year. Total production declined 1.1%, and manufacturing production fell 1%. Manufacturing is on track to fall 10% at an annual rate this quarter, about half the pace of decline last quarter. Although production should grow more in line with sales soon, further moderating the declines in output, incoming manufacturing surveys for June are mixed on whether the improving trend is continuing.

Producer Price Index: 0.2%
Producer prices for finished goods rose in May (0.2%), almost entirely because of rising prices for energy products. When food and energy prices are excluded, core prices fell slightly (-0.1%), marking the first decline since October 2006. Demand is weak, and there is little inflationary pressure left in the pipeline. Core prices among intermediate products fell for the eighth month in a row (-0.2%).
NAHB Housing Market Index -6.3%
The NAHB housing market indicator came in below expectations for June, scoring a 15 compared with the May level of 16, a 6.3% drop. Although both the present single-family sales and prospective buyer traffic components held level between May and June, there was a slight drop in the expected six-month sales component, most likely caused by the jump in mortgage interest rates over the past months. It is thus possible that the increase in interest rates is already starting to sap confidence in prospects of a housing market recovery.

New Residential Construction (C20) +17%
Housing starts increased as expected, but the gain was a surprisingly strong 17% in May compared with April. At 532,000 annualized units, starts are back up to their March pace. Multifamily starts are driving the rapid gain, but single-family starts also increased nicely. Permitting is up as well, while completions are down slightly. Overall, this report is consistent with a bottom in residential construction.

Chain Store Sales Snapshot: -0.6%
Chain store sales fell 0.6% in the week ending June 13, as the ICSC sales index is trending downward. Sales were 1.5% below their year-ago level, the worst performance in seven weeks. The ICSC blamed cooler than normal weather and rising gasoline prices for the poor performance.
Jobless Claims +3,000
Initial claims for unemployment benefits increased by 3,000 to 608,000 for the week ending June 13, still low relative to readings earlier in the year. However, it is encouraging that continuing claims decreased by 148,000 to 6.687 million for the week ending June 6, which points to the labor market firming somewhat.

State Personal Income -0.5%
Personal income fell 0.5% in the first quarter of this year, compared with a 0.4% decline in the fourth quarter of 2008. Real personal income fell 0.2% as the personal consumption expenditures index dropped 0.3% during the quarter. Income declined in 37 states and across all regions as the national recession deepened and broadened in the first three months of the year. Declines in income were largest in New England, the West, and the Plains states, as finance, farming and durable goods manufacturing were hit hard.

Weekly Natural Gas Storage Report +114.00 bcf
Working gas in underground storage rose by 114 billion cubic feet during the week ending June 12. The consensus estimate was for an increase of 106 bcf.
Retrain Displaced Workers!
FIPSE Special Focus Competition: Innovative Strategies in Community Colleges

POSTED: 6/5/2009
FUNDING SOURCE: Dept. of Education
$ AVAILABLE: $7,000,000
MAX GRANT SIZE: $750,000
DEADLINE: 8/4/09
DESCRIPTION: Funds to support reforms, innovations, and significant improvements of postsecondary education that respond to problems of national significance and serve as national models by helping retrain workers displaced by economic changes.


Stop Alcohol Abuse at Colleges!
Grants for Coalitions To Prevent and Reduce Alcohol Abuse at Institutions of Higher Education
POSTED: 6/5/2009
FUNDING SOURCE: Dept. of Education
ELIGIBILITY: IHEs and nonprofits
$ AVAILABLE: $2,475,000
MAX GRANT SIZE: $375,000
DEADLINE: 7/6/09
DESCRIPTION: Grants for a wide array of activities designed to reduce alcohol abuse among college students, particularly those who are underage.


Advance Agriculture-Based Renewable Energy!
New Era Rural Technology Competitive Grants Program

POSTED: 6/8/2009
ELIGIBILITY: Community colleges and advanced technological centers
$ AVAILABLE: $750,000
DEADLINE: 7/20/09
DESCRIPTION: Grants for technology development, applied research, and/or training to develop an agriculture-based renewable energy workforce to serve rural communities.


Grants for Innovative Research!
Recovery Act Limited Competition: Small Business Catalyst Awards for Accelerating Innovative Research

POSTED: 6/3/2009
ELIGIBILITY: Small businesses
$ AVAILABLE: $5,000,000
DEADLINE: 8/3/09 (LOI); 9/1/09 (final)
DESCRIPTION: Grants for entrepreneurs of exceptional creativity, drawn from scientific and technological environments beyond NIH, who propose pioneering and possibly transformative approaches to addressing major biomedical or behavioral challenges with the potential for downstream commercial development. 
Bonneville Research is a regional consulting firm focused on consulting services to state and local governments including economic analysis for real estate development, public-policy analysis, tourism and economic development. Since its founding in 1976, Bonneville Research has completed assignments throughout the intermountain west yielding unmatched experience in high quality public policy analysis and economic analysis.

In broad terms, Bonneville Research assists state and local governments find workable solutions and to establish quality and sustainable public policy.  We often work with private developers and public agencies in assessing the future economics and outcomes of real estate projects, economic development plans and opportunities for public/private partnerships. Bonneville Research offers a diverse array of economic analysis and tools to answer complex problems.
  • Market and Financial Feasibility Analysis
  • Concept and Development Programming
  • Operational Analysis and Budgeting
  • Service Delivery and Cost Effectiveness Analysis
  • Business Organization and Marketing Strategies
  • Services Repositioning and Disposition
  • Economic Development Plans
  • Demand Assessment for Public and Cultural Facilities
  • Public-Private Partnerships
  • Economic and Fiscal Impact
  • Grant-writing/Fundraising

Fusing talents of a multi-disciplined staff, the firm's experience has concentrated in four interrelated fields:

  • Economic development and community planning
  • Law enforcement, fire and public safety
  • Recreation, tourism and leisure time
  • Management, benchmarking and best practice services
Bonneville Research
170 South Main Street, Suite # 775
Salt Lake City, Utah 84101

In This Issue
Economic Notes
Top 5 retail markets in the U.S.
On Track for Growth:
Public Policy Initiatives:
Recent Bonneville Research Projects:
Top 5 retail markets in the U.S.: 
As credit has tightened and Americans have pulled back on their spending, the retail market has suffered significantly. However, the performance of individual markets in the near term will be determined largely by recent supply trends.

Traditionally supply-constrained markets will outperform this year, while markets where developers delivered space with the assumption of continued population growth will record significant vacancy increases and considerable rent declines.

The top five retail markets for 2009 are:
1) San Diego;
2) San Francisco;
3) Washington, D.C.;
4) San Jose, Calif.; and
5) Portland, Ore.

On Track for Growth:
Transit projects offer investment opportunities
The American Recovery and Reinvestment Act (ARRA) has given local and state governments across the country millions of dollars for infrastructure projects of all kinds. These projects will create investment opportunities for the commercial real estate industry, particularly developers and investors interested in transit-oriented development (TOD).
Public Policy Initiatives:
NC - Perdue Pushes Green Energy Plan Making State a Leader in Green Economy. A new report by the Pew Center on the States indicates that North Carolina is poised to capitalize on Gov. Bev Perdue's green energy plan, including her proposals to make green energy jobs a cornerstone the state's economy. The report lists North Carolina among the top dozen states in growing "clean energy economy jobs." "To get green right, we must build on our strengths that attract green companies a well-trained, educated workforce; existing relationships between businesses and research institutions; and a strong link between energy policy and economic development," Gov. Perdue said. http://www.allamericanpatriots.comgreen-economy

NY - Paterson Announces Expansion of Children's Health Insurance. Gov. David Paterson announced that New York is now eligible to receive $64 million in new federal funding to support the expansion of the state's children's health insurance program known as Child Health Plus. President Obama approved the expansion, and made the approval retroactive to September of 2008. "This federal funding will provide fiscal relief and allow us to reach more children at a time when access to affordable health insurance is more critical than ever for New York's families," said Gov. Paterson.
WA - Gregoire Announces Clean Water Recovery Act Projects. Gov. Chris Gregoire and Department of Ecology Director Jay Manning announced the clean water projects across the state that will receive a total of $65.4 million in federal recovery funding from the American Recovery and Reinvestment Act. "This economic recovery funding will create jobs and clean water supplies for communities around our state - essentially doubling the money we could offer during these otherwise economically depressed times," said Gov. Chris Gregoire.

This Weeks Leads:
Maaco Collision Repair & Auto Painting
MAACO Franchising, Inc. trades as Maaco Collision Repair & Auto Painting at 500 locations nationwide and in Canada, Mexico and Puerto Rico.  The automotive repair and paint centers occupy spaces of 8,000 sq.ft. to 10,000 sq.ft. in freestanding locations.  Plans call for 20 to 30 openings nationwide during the coming 18 months.  Typical leases run 15 years.  Preferred demographics include a population of 100,000 within five miles earning $60,000 as the average household income.  The company is franchising.  For more information, contact Frank Costello, MAACO Franchising, Inc., 381 Brooks Road, King of Prussia, PA 19406
Aamco Transmissions
Aamco Transmissions, Inc. trades as Aamco Transmissions at 1,100 locations nationwide.  The shops, offering transmission repairs and services, occupy spaces of 4,000 sq.ft. in freestanding locations and strip centers.  Growth opportunities are sought throughout the existing market during the coming 18 months.  Typical leases run five years with two, five-year options.  Specific improvements are required.  Preferred demographics include a population of 50,000 within three miles.  The company is franchising.  For more information, contact Joe Wolf, Aamco Transmissions, Inc., 201 Gibraltar Road, Suite 150, Horsham, PA 19044
Monday Report Archive

Visit the Monday Report Archive
Join Our Mailing List
Recent Bonneville Research Projects:
Urban Renewal & Economic Development - Taylorsville, Utah
The City of Taylorsville, Utah, prior to incorporation in 1996, was known as Taylorsville-Bennion. Taylorsville is bordered by West Valley City to the north, Murray City West Jordan City to the south, and Kearns to the west, and has a population of 57,439.  Bonneville Research is currently working with the City of Taylorsville to evaluate the potential of establishing Urban Renewal Project Areas for four sites, and one Economic Development Area. Bonneville Research is preparing a "blight" analysis to evaluate the potential of establishing any or all of the areas as an Urban Renewal (Redevelopment) Project Area and thus eligible for tax increment financing (TIF). The preliminary Bonneville Research Urban Renewal (RDA) Bight Analysis has resulted recommending one site not be considered as an Project Area.
Contact: Keith Snarr, Taylorsville Economic Development Director, (801) 963-5400