The Monday Morning Quarterback | A quick analysis of important economic data released over the last week
The November Blue Chip Consensus forecast calls for year-over-year real GDP growth of 1.7% this year and 2.5% next. While the 2014 number will be up, it marks the fifth year of this recovery that will be below the 20-year expansion average of 3.2%. Subpar growth continues.
The monetary base, the sum of currency in circulation and bank reserves, is up 37.4% over the last year as of October. Fortunately, it has not turned into money supply. M2, as of October, was up 6.8% over the last year.
Industrial production for October was not good at the headline level, but, the detail was good. Overall, industrial production slipped 0.1% after jumping 0.7% in September. Expectations were for a 0.1% gain in October. Importantly, the manufacturing component was up 0.3% in October following a 0.1% increase in September.
Capacity utilization for total industry slipped to 78.1% from 78.3% in September. Analysts forecast 78.3%.
Strengthening house prices and increased interest rates in metro areas across the country contributed to lower housing affordability in the third quarter. In all, 64.5% of new and existing homes sold between the beginning of July and the end of September were affordable to families earning the national median income of $64,400. This is down from 69.3% of homes sold that were affordable to median income earners in the second quarter. This was the biggest decline since the second quarter of 2004.
Arizona consumer confidence declined in October after two quarters of improvement. This is similar to the national picture. Yet, because the survey conducted by Behavior Research comes on the eve of holiday spending, the mood shift does not bode well for the holiday season spending. Confidence is now at its lowest level since late 2011. The difference is that at that point, confidence was increasing rapidly.
Both enplanements and deplanements at Sky Harbor are down from a year ago. Total air traffic is down 1.1%.
The Greater Phoenix housing affordability index dropped to 70.6 in the third quarter, down from 76.2 in the second quarter and 80.9 a year ago. As with its national counterpart, a combination of increased housing prices and higher interest rates caused the decline. Yet, when 70.6% of homes sold over the last quarter were considered affordable to median income families, the outlook is still favorable. As the table below indicates, both Tucson and Phoenix are still very affordable markets. Flagstaff, as has been the case for years, is less affordable.