The Monday Morning Quarterback | A quick analysis of important economic data released over the past week
U.S. Snapshot
The government shutdown weighed heavily on the minds of consumers as the confidence index dropped from 80.2 in September to 71.2 in October. The index now stands below levels reached a year ago.
National retail sales for September declined 0.1% from last month, but, are 3.2% above a year ago. This is a sign of weakness going into the Christmas season.
Sales of light vehicles and trucks fell a sharp 5.2% in September following a 1.9% rise in August. The drop was led by domestic trucks, down 7.5%. Domestic cars were down 5.1%. Import autos were down only 1.8%.
Consumer prices were up 0.2% in September vs. August and now stand a modest 1.2% over a year ago. This is good news and bad news. The bad news is that the modest increases are below the Fed target of 2.0% and reflect very weak domestic demand.
Growth in industrial production topped expectations in September. But, it was all about atypically cool weather. Manufacturing was still flat. Overall, industrial production was up 0.6% following a rise of 0.4% in August. The gain was primarily due to a surge in utilities as cool weather boosted utility demand.
Capacity utilization rose to 78.3% from 77.9% in September. While this is an improvement, it is still below the 80% that has historically been associated with increases in plant spending.
According to the Institute for Supply Management, manufacturing expanded in October for the fifth consecutive month and the overall economy grew for the 53rd consecutive month.
Pending home sales declined for the fourth consecutive month in September as higher mortgage interest rates and higher home prices curbed buying power. The Pending Home Sales Index, a forward looking indicator based on contract signings, fell 5.6% to 101.6 in September from a downwardly revised 107.6 in August. The index is at the lowest level since December 2012.
According to the S&P/Case-Shiller home price index, home prices continued to climb nationally. Both the 10 and 20-city indices were up 12.8% over a year ago and 1.3% in August vs. July.
Arizona Snapshot
According to data compiled by Fletcher Wilcox and the Cromford Report, it appears the major disruptions in the Greater Phoenix home market is near an end. September foreclosure starts were below 2006 levels. Auctioned properties were the lowest since 2006. Short sales were the lowest since 2007. Virtually every indicator of disruption was down significantly.
According to CBRE, the Greater Phoenix office market continues to improve. For all three quarters of 2013 reported, absorptions significantly exceeded change in inventory. Thus, vacancy rates are down 1.7 percentage points over the last year. While vacancies are still very high by historic standards, they are moving in the right direction. The same is true in retail markets where vacancies are down 0.8 percentage points over the past year and are approaching 10%. Industrial markets are more mixed as change in inventory for the first three quarters of the year exceeded absorption by over 1 million square feet.
