Economic index now pointing positive

The Southern Nevada Index of Leading Economic Indicators has shown signs of bottoming out over the past six months, posting a monthly gain in September mostly on improvement in summer tourism data.

The index rose to 126.26 in September, up from 125.91 the previous month, as McCarran International Airport passengers, gross gaming revenue and visitor volume all contributed positively, the UNLV Center for Business and Economic Research reported Tuesday.

The index is still trending downward from its peak, but there's some hope that the rate of decline is nearing an end, said Keith Schwer, executive director of the research center and an economics professor at University of Nevada, Las Vegas.

"At no time has there been a clear signal the recession is ending," Schwer said. "On the other hand, the U.S. index has bottomed and shown repeated increases."

McCarran airport's passenger count increased 3.5 percent in July from the previous month, gaming revenue jumped 6.2 percent and visitor volume grew 6.8 percent. Gallons of gasoline sold increased 7.2 percent in July.

The economic index, compiled by the UNLV research center, is a six-month forecast from the month of data, based on a net-weighted average of each series after adjustment for seasonal variation. September's index is based on July data.

The accompanying 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.

Guy Hobbs of Hobbs, Ong and Associates, a financial advisory services company in Las Vegas, said the local economy won't recover until construction becomes a significant contributor.

"We've allowed our economy to be that way and allowed our fiscal system to rely on growth, even though the warnings have been out there for 15 years," Hobbs said. "As long as new assessed valuations were higher and there was construction in gaming and commercial, everything was great. Unless we change that system, we have to work on that part of it before things get back to being as robust as they once were."

Overall business activity in Clark County continues to slide, Schwer said. A separate business activity index from the economic research center dropped to 161.92 in July from 165.29 in June.

"We see no signs of the recession having bottomed out in this indicator," Schwer said. "On the contrary, further economic difficulty remains."

The construction industry continues to drag the local economy down with a 50 percent decline in residential building permit valuation and 90 percent decline in commercial permit valuation.

Industrial development in Las Vegas has come to a near standstill with less than 700,000 square feet under construction, Grubb & Ellis' third-quarter market report shows. Vacancy is running at 12.8 percent, or more than 12.6 million square feet of empty space.

Xavier Wasiak, senior vice president at Grubb & Ellis in Las Vegas, said there continues to be a lag in the industrial market as tenants take longer to sign leases. They're looking to find better deals in other locations and possibly downsize at a cheaper rate.

"Not much has changed," he said. "There seems to be continued apprehension about making any move quickly. They're taking many months to make up their minds."

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.