State Economy to Thrive Into ‘88, B of A Says

Paced by the “booming” housing business and the electronics industry’s continuing recovery, California’s economic expansion should continue well into 1988, according to a forecast released Monday by Bank of America.

In the past six months, “California’s economic outlook has improved considerably,” according to the bank’s California Economic Report, which gave much of the credit to lower interest rates and oil prices and the decline in the value of the dollar.

With the exception of agriculture, non-residential construction and energy, “all sectors of the economy will expand,” the report stated. “In the months ahead, increasing rates of economic growth will lead to higher levels of household income, retail sales, employment, housing starts and corporate profits.”

Inflation, as measured by the consumer price index, will also remain under control, the report said. Prices are expected to rise 2% this year with the pace quickening to 3.5% in 1987, the report continued.

Longest Boom Since 1960s

If correct, the forecast means that the current economic expansion, which began in the first quarter of 1983, will be the longest since the nine-year boom that lasted from 1961 through 1969.

The length of the current expansion “is extraordinary,” said Bank of America economist Jeanette Garretty, who noted that growth in the latter half of the 1960s was fueled by the Vietnam War.

One of the most striking changes in the state’s economy during the last year has come in the residential real estate sector, where lower interest rates and relatively stable prices have put the median-priced home within reach of a third of the state’s households. Last year, the report said, only 15% of the state’s households could afford that home.