Southern California’s economic landscape is improving in baby steps: Cal State University Fullerton has released the Southern California Leading Economic Indicator for the third quarter, and the news is good. The Indicator, a calculation of a number of economic variables, measures the region’s economic performance and projects whether it will grow or decline based on past and present performance factors.
The Indicator increased to a value of 107.66 in the third quarter of 2012 from a Q2 2012 value of 106.72, an improvement of 0.88 percent. The Indicator surpassed the pre-recession high set in Q4 2005, a value of approximately 103.5, in the fouth quarter of 2011, and has continued to increase. In fact, the Indicator has seen consistent, sustained improvement over the past twelve quarters, or three years.
Cal State Fullerton’s Adrian Fleissig, a professor in the Economics and Statistics department, compiles the report, which is released by the Institute for Economic and Environmental Studies at the Mihaylo College of Business and Economics.
“Given that the SC Indicator has increased over a three-year period is significant in that it is highly unlikely that the Southern California region will experience recession-like conditions,” Fleissig said.
As far back as 1992, the Southern California Indicator’s value sat under 80 and only crossed the 100-point mark in the second quarter of 2004. The financial crisis sent the Indicator dipping below 100 in the first quarter of 2008. It took time, but the local economy grew again, with the Indicator hovering at the threshold of growth before returning to positive territory in the second quarter of 2010.
Fleissig explained that news and reports of the fiscal cliff does factor in to the Indicator’s calculation. “The fiscal cliff will affect corporations and households view of the SoCal region which is captured through the “Pacific region consumer confidence index” ... and is one of the seven variables used in the SC Indicator,” Fleissig said. “So, for example, if corporations and households become more pessimistic about the future, the “Pacific region consumer confidence index” is likely to decline which will have a negative impact on the SC Leading Indicator.”
The Southern California Leading Economic Indicator is calculated by indexing seven national and regional variables and comprises the economic regions of Los Angeles, Orange, San Bernardino, Riverside, Ventura and Imperial counties. Regional data include non-farm employment, the unemployment rate, the number of regional building permits and the Pacific region consumer confidence index. National factors influencing the Indicator include interest rates, the Standard & Poors 500 stock index and the real money supply.
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