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Gaming Guru

Hubble Smith

Growth in Las Vegas Valley Seen Cooling

17 January 2006

LAS VEGAS, Nevada -- Higher fuel prices and rising interest rates have yet to exact their toll from the dynamic Southern Nevada economy, but growth is coming at a slower pace, a local economist said.

The Southern Nevada Index of Leading Indicators, compiled by the Center for Business and Economic Research at University of Nevada, Las Vegas, showed a modest gain to 132.16 in December, up 0.1 percent from the previous month and 1.28 percent from a year ago.

"Things have been good for so long that some slowing is inevitable," said Keith Schwer, director of the research center. "It's not unexpected."

Still, the upward movement in the index points to further expansion in the first half of the year, he said.

"Tourism and construction continue along strong growth paths, bumping up against capacity constraints," Schwer said recently. "Capacity constraints work to hold the rate of expansion."

The accompanying Review-Journal chart includes several of the index's categories, along with data such as new residents and employment and housing numbers, updated for the most recent month for which figures are available.

Clark County gaming revenue increased 17.6 percent in November to $846.7 million, while visitor volume was up 4.8 percent to 3.5 million. Room inventory grew 3.7 percent from a year ago to 133,608.

"The volume of traffic is not that much greater, but they're still coming and they're coming with more money," Schwer said.

Even with the Fed pushing up the prime lending rate, interest rates are sill relatively low, particularly long-term rates, which haven't increased much at all, Schwer said.

"They could be a lot higher, but they're not going up that fast," he said.

Las Vegas has led the nation in job growth, powered by the construction and hospitality industries, and total employment grew 7.3 percent in November to 898,800. The unemployment rate was 4 percent, up one-tenth of a percentage point from a year ago.

Schwer said if gasoline prices are looked at as a percentage of gross domestic product, there is less energy used to produce GDP despite people driving sport utility vehicles and other gasoline guzzlers.

The biggest impact of fuel prices, he said, is for natural gas and from a regional point of view, it's not as significant for Las Vegas as it is for the Midwest, for example.

"We're not a heavy user of energy. You may start to see an impact on electricity (rates) because we use gas for generation plants," Schwer said.

"We're seeing adjustments that are below the radar like the coal(-fired power) plant Nevada Power wants to build in Ely," Schwer added.