To Exceed State’s Growth : Strong Economy Forecast for ’86

San Diego’s economy in 1986 will outpace California’s, which in turn will exceed the nation’s growth, a pattern mirrored in prior years, a Bank of America economist predicted Tuesday.

The difference next year is that the gap between the growth rates of the region, state and nation will narrow, reflecting the state’s weakening agricultural and computer/high-technology sectors, according to Frederick L. Cannon, head of regional and resource economics for San Francisco-based Bank of America.

Cannon, speaking at a briefing to announce the bank’s predictions for the California economy in 1986, said that because San Diego’s “diverse economy isn’t tied to agriculture and high technology,” it should exceed the bank’s predicted 3.6% increase in the Gross State Product next year.

San Diego’s growth rate will be more than 1% higher than that, Cannon predicted.

That prognostication is lower than estimates by some local economists, who have pinned San Diego’s 1986 growth rate, after inflation, at 5.5%.

The Bank of America’s predictions are “good news, not great news, for San Diego,” Cannon said.

San Diego’s high-tech focus has “been on defense contractors and biomedical, not just computers,” Cannon said. Because of that, he added, San Diego will avoid many of the business downturns and layoffs that have plagued such areas as San Jose’s Silicon Valley.

Tourism, San Diego’s third-largest industry, will continue strong into 1986, Cannon said, because “people will take more vacations.”

In addition, as the dollar weakens, he said, “foreign exports will strengthen in the Port of San Diego.”

San Diego’s 23% office-vacancy rate will be absorbed by the flood of new business entrants, Cannon maintained.

To meet the housing demand of the new businesses, San Diego’s stock of residential developments will continue to increase. “There’s a lot of new dirt being broken, unlike areas such as San Francisco,” Cannon said.

That trend, he added, will “keep a lid on home prices,” which average about $106,000, below the statewide average of $115,000.

If federal spending-limits bills now before Congress are enacted, San Diego’s defense contractors “would be hit hard,” Cannon said.

“But San Diego’s economy is much more diverse than 15 years ago,” he said. “And other sectors may pick up the (slack). But there will be some contraction.”