The Monday Morning Quarterback
ELLIOTT D. POLLACK & Company
The U.S. economy continues to move along at a slow pace. But, enough growth is occurring that the Fed is now commenting more often about mopping things up a bit. Right now the main action is a reduction in the level of monthly bond purchases. Expectations are that true tightening won’t occur until mid 2015 but things can always change.
Inflation is creeping up slowly, but the rate of economic growth is not sufficient for this to be a major risk, as of this week. This month the year-over-year value of the CPI was 2.1%. Less food and energy, two items that can cause large swings in the index, the value was still 1.9%. The Index of Leading Indicators continues to climb. This normally points to stronger future growth. The stock market was driving much of this index’s growth during the past several months. Now, with stock prices more stagnant, other components are posting some positive results such as the employment categories. Keep an eye out for some volatility in the index as we start to see some volatility in the stock market. In any one month the index could drop but it may not be signaling economic weakness, just a neurotic Wall Street.
U.S. Snapshot:
- The manufacturing sector appears to be making a comeback as industrial production rebounded 0.6% in May, after a 0.3% dip the month before. Industrial production now stands 4.3% above a year ago. This pushed up capacity utilization to 79.1, up from 77.8 a year ago.
- Housing starts showed that the road to recovery for the housing industry remains a bumpy one. Housing starts fell 6.5% over the month following a strong 12.7% spike in April. May stood 9.4% above year earlier levels.
For more perspective, last year the state’s employment base grew 2.0%. Up until now, the employment growth in the state was closely following projections; even the 2.0% from last year. However, the current rate is below the previously projected 2.5% for 2014. While a number of analyses have examined why the rate is so weak, the bottom line is that we won’t likely see a sharp rebound in the employment numbers without improvement in the housing market and greater inflows of people.
- Retail sales in April were up 7.6% for the state and 5.0% for Maricopa County when compared to a year ago.
- The latest release from R.L. Brown showed that there were 1,033 new home permits issued in Greater Phoenix, as of May. This is down 16.5% from a year ago. Year-to-date, 4,691 permits have been issued compared to 5,696 over the same period in 2013. This is a very disappointing 17.6% decline.
