Growth Index Takes a Breather

The Southern Nevada Index of Leading Economic Indicators has paused over the past few months after steadily increasing during most of 2003 and earlier this year.

The index, compiled by the Center for Business and Economic Research at University of Nevada, Las Vegas, stood at 129.33 in July, up slightly from 129.23 the previous month.

It reached a high of 130.28 in November and matched that number in February.

The index is a six-month forecast from the month of the data, May, based on a net-weighted average of 10 series after adjustment for seasonal variation.

Six series contributed positively to the July index. Four showed declines.

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.

"No doubt, rising oil prices and associated concerns about geopolitical risks have a lot to do with this slowdown," center director Keith Schwer said.

"Generally speaking, conditions here have tended to follow what's happening in the national economy. The rate of expansion has slowed down. That's reflected in those numbers. I think the same thing impacting the national economy is impacting us."

Schwer said fuel prices generally permeate the economy and consumers are spending more of their disposable income on gasoline, which leaves less for other things.

Tourism activity slowed in May, with the seasonally adjusted series posting a modest 0.2 percent gain from the previous month.

Gaming revenue has not held to strong levels experienced during the winter months. Still, it grew 7.3 percent in July to $704.3 million.

Visitor volume was only up 0.8 percent, but McCarran International Airport passengers increased by 14.2 percent.

The housing industry continues to put up strong numbers, led by a 31.7 percent increase in existing home sales.

John Restrepo, principal of Restrepo Consulting Group in Las Vegas, said the local economy is continuing to strengthen.

"That's a function of continued low interest rates and healthy regional and national economies. California is doing better and that boosts our economy," he said.

Like the housing market, there's a segment of speculative investors purchasing commercial properties in Las Vegas, Restrepo said.

A good example is Argus Realty Investors of San Juan Capistrano, which acquired three warehouse and distribution buildings at Silverado Business Park in North Las Vegas for $10.6 million in February 2002 and recently sold the property for $12.6 million. That's a 16.8 percent average annual return for Argus' tenant-in-common investors.

"The building was under contract when 9-11 hit, dealing a harsh blow to Las Vegas tourism and conventions and we lost several tenants," Argus President Tim Snodgrass said. "But we rode out the downturn, targeted only financially strong, high-quality growth companies as new tenants and boosted occupancy from 65 percent when we bought it to 100 percent."

Expectations for new construction projects coming on line are robust, Schwer said, but there's deep concern about how long it will last.

Commercial and new home permits showed only modest gains in the index and commercial building permit valuation dropped 9.6 percent to $54.8 million.