Business Activity in the Inland Empire Is on the Rise Despite a National Decline

By: Sharjeel Sohaib

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Dec 2, 2022

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Key Points

  • According to the new Inland Empire Business Activity Index by the UCR School of Business Center for Economic Forecasting and Development, business activity in the Inland Empire has continued to rise, in contrast to the national fall in GDP. 
  • However, IE’s business activity rise in the second quarter of 2022 (the most current statistics available) represents a considerable fall in growth from previous quarters.

The rise in Inland Empire’s Business Activity

The Inland Empire’s business activity increased by 1.6% in the most recent quarter, compared to 4.7% in the first quarter of 2022 and 6.4% in the fourth quarter of 2021. 

On the other hand, GDP in the United States shrank by 0.6% in the second quarter. Furthermore, the Inland Empire’s short-term prognosis remains strong, with local economic activity expected to expand between 2% and 3% over the next 12 months.

According to the report, the longer-term fall in the IE’s growth rate is anticipated now that the region’s economy has returned to pre-pandemic levels.

“The steadiness of the Inland Empire’s overall economic recovery, and its forecast for continued growth, has been partially driven by the strength of its largest industry, transportation, and warehousing, which boomed during the pandemic years but is now starting to slow,” said Taner Osman, research manager at the Center for Economic Forecasting and one of the index authors. “Just as important in the slowdown we’re seeing, the local real estate market has cooled substantially due to rising interest rates, leading overall economic and business activity to weaken.” 

Property Prices Increased, But Wages Dropped

According to the research, even after accounting for local inflation, the actual cost of buying a property in the Inland Empire has grown 24.5% since the beginning of the year. At the same time, the region’s average inflation-adjusted hourly wages for private-sector employees have fallen 6.1%.

Sales of existing single-family homes, which account for the lion’s share of the Inland Empire’s residential market, were down 9.3% in the first half of this year. Despite the reduction in sales, prices grew 17.9% over the same period. These figures demonstrate the severe shortage of housing supply in Southern California and the strong demand for homes across the state.

Throwback to Business Activity Performance in 2021

Startempire Wire also reported about the booming business activity in the region in 2021. As per last year’s report by UCR, business activity in the Inland Empire region expanded by 8% in the second quarter of 2021. The growth was higher than the national average for the same period, roughly 6.6%.

Read Here: Inland Empire Bounces Back with Improved Business Activity

Future Predictions for the Inland Empire’s Businesses Conditions 

The Center for Economic Forecasting anticipates no significant changes in the direction of the Inland Empire economy over the next 12 months, with economic activity rising between 2% and 3%. Inflation will persist, but so will economic development, although at a slower rate. 

The subsequent collapse is unlikely to start in the private sector, where fundamentals remain solid. The issue will arise when the federal government attempts to address the country’s mounting structural deficit. 

Nobody knows how long bond markets will offer the US government a blank check. Still, sometimes, foreign lenders will grow wary, and tough decisions will be made. It remains to be seen how this all plays out, especially given the current political climate. There will be a reckoning, although the specific day is unknown.

Read the complete report here.

Wrap Up!

Inland Empire business activity grew by 1.6% in the second quarter, which outperformed the national GDP fall. The short-term outlook remains positive, with local economic activity forecast to grow between 2% and 3% over the next year. 

The Center for Economic Forecasting forecasts no substantial changes in the Inland Empire economy’s path during the next 12 months. Existing single-family home sales fell 9.3% in the first half of this year, while prices rose 17.9%. The average inflation-adjusted hourly salary for private-sector workers in the area declined by 6.1%.

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