Elliott Pollock says Heading into fall, GDP, housing prices, personal income, consumption ‘going in the right direction’

The Monday Morning Quarterback: A quick analysis of important economic data released over the past week

Elliott D. Pollack & Company

Summer ends this month, but there is still much uncertainty.  Housing prices are up, but to what extent will they grow and for how long? Employment is also growing, but at what rate for this fall and winter?  Clint Eastwood is giving political speeches, but will he continue to sound like Gary Busy?  Unfortunately, we will need to take things one month at a time.  The uncertainty will indeed be a drag on economic performance in the shorter term.  But, the longer term forecast remains mostly intact: continued, albeit relatively weak, economic growth for the remainder of this year and next.

This past week’s data releases included some modestly positive news.  Real GDP was revised upwards for the second quarter of this year. The preliminary estimate of 1.5% growth was increased to 1.7%.  This is not a large revision, but it is the direction that counts at the moment. Inflation remains in check with the GDP Price Deflator growing at a modest 1.7%.  Disposable personal income is modestly growing at an annual rate of 3.4% while personal consumption expenditures are up 3.3%.  None of this data is all that impressive.  It is going in the right direction though.

On the negative side, the much publicized U.S. Consumer Confidence Index stands at 60.6 for August. This is down 7.3% from July.  A reading of 100.0 means that we are “back to normal”.  There are some important things to note.  First, “normal” will be defined differently by businesses and consumers during the slowly developing recovery.  Measuring current confidence in the economy compared to the 1985 benchmark of 100.0 may be a little misleading with all that has recently happened.  Furthermore,the survey data of consumers’ confidence in the economy is inconsistent.  Also, the upcoming negative political advertisements related to the presidential election will have a larger negative influence on the index than any positive economic data release.  It may be better to not put too much weight on this index for a few months.

As noted in previous releases, Arizona’s economic performance continues to impress compared to the nation as a whole. However, the same pattern will likely impact the State.  A dampened recovery in the fall and winter will likely arise as we wait, again, for things in Washington D.C. to improve.

Top Stories of the Week

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September 2012