The fires that raged in the state’s forests, the drought that reduced crop yields and a jittery stock market provided plenty of bad news in late August, but in general Idaho business conditions are good. Growing U.S. markets to sell to, richer and more confident consumers in Idaho, low inflation and continued improvement in the real estate, construction and related sectors are helping most Idaho businesses be profitable.

Late August also brought some good news for the economy. The Bureau of Economic Analysis announced the U.S. economy grew at strong 3.7 percent rate in the second quarter of the year. U.S. consumer confidence jumped to its highest reading in seven months.

The slowdown in China pushed commodity prices down this summer. China is the world’s biggest commodity consumer, with 12.8 percent of all global commodity imports. The United States, the second-biggest global consumer, accounts for 10.3 percent. Lower commodity prices help keep inflation low, but reduces profits for some Idaho mines and farms.

The drop in gasoline prices since the summer of 2014 is reducing the costs of transportation for many Idaho businesses and giving consumers a little extra spending power, boosting retail sales. The price of gasoline averaged $2.58 a gallon at the end of August, down from $3.44 at the same time last year and the lowest in August since 2004. With oil prices continuing to fall, the American Automobile Association predicts the price of gasoline could fall to or near $2 a gallon by the end of the year.

Another factor keeping inflation extremely low is the rise in the value of the dollar, which makes imports less expensive. That’s helpful for Idaho retailers and manufacturers that use imported raw inputs, but hurts Idaho exporters — including manufacturers and farmers — because it makes American goods more expensive for foreign buyers. The slowdown in China and economic problems in Europe and Japan also contributed to the dollar’s rise. The U.S. dollar rose 15 percent against a broad mix of currencies between Aug. 21, 2014, and the same day a year later, according to the Federal Reserve Board of Governors. In the same period, the American dollar rose 20 percent against the Canadian dollar. Canada is Idaho’s largest trading partner. If Canada has entered a recession, as recent evidence strongly suggests, the American dollar could continue to rise against the Canadian dollar.

With consumers more secure, mortgage rates near historic lows and housing prices rising at moderate rates — growing 5.2 percent in the U.S. and 7.9 percent in Idaho between the second quarter of 2014 and the same quarter this year — the real estate markets and construction sectors in the U.S. and Idaho are continuing to expand. U.S. housing starts rose from a seasonally adjusted rate of 1.095 million units in July 2014 to 1.206 million in July 2015, while Idaho new private housing units authorized by building permits rose from 503 to 539. That translates into increased sales for retailers and wholesalers selling building materials, landscaping products, furniture and appliances and for concrete and cement producers, gravel pits and stone quarries. It also is helping Idaho’s lumber and wood product manufacturers hold their own, despite intensified competition from Canada and other countries. Profit margins for sawmills are being squeezed. Log prices remain relatively high, but the Random Lengths composite price of framing lumber fell from $398 in the second week of August 2014 to $319 one year later.

Falling commodity prices and lower crop yields because of this summer’s drought is expected to reduce farm incomes in Idaho for a second year in a row. Two years ago, farm income was at record highs. Falling prices for wheat and other crops cut into farm income last year, but milk and cattle prices rose to record highs. This year, crop prices have fallen further, and milk and cattle prices also are on the decline. That means farmers will have less to spend on equipment, trucks and personal expenses.

Rising incomes and greater consumer confidence are boosting retail activity in Idaho. Retail trade earnings in Idaho were 8.1 percent higher in the first quarter of 2015 than in the first quarter of 2014, according to the U.S. Bureau of Economic Analysis.

Increased business activity, as well as higher incomes for consumers, have increased tourist visits, business travel and convention activity in Idaho. Hotel-motel receipts in Idaho totaled $258.4 million in January through July 2015, up 13.3 percent from the same months the year before, according to the Idaho Travel and Convention Tax report by the Idaho Tax Commission.

Idaho businesses also benefit from the state’s pro-business policies. The 2015 Thumbtack.com Small Business Economic Sentiment Survey, released in July, looked at feedback from more than 10,000 small businesses nationwide to rank the states by how friendly they are to small businesses. It gave Idaho and three other states – Texas, Utah and Virginia — A+ grades. Idaho businesses rated the state highly for overall friendliness, the ease of starting a business, regulatory background, tax code and the availability of training and network programs.

Kathryn.Tacke@labor.idaho.gov, regional economist
(208) 799-5000 ext. 3984