Elliott D. Pollack & Co.
The Monday Morning Quarterback /A quick analysis of important economic data released over the past week
Good news continues. As we have said before, this would normally be the boom portion of the cycle. Given the slower than normal rate of growth in this cycle, 2015 will almost be back to average for an expansion. BUT, no boom is likely at any time soon. The good news is that unless something unexpected occurs, the cycle is likely to last quite a while longer. Slower than normal? Yes. Recession at any time soon? Not likely. This is true despite the fact that fewer people are entering their peak spending years for the next several years and there will be no accelerator to income as there was in the 1970’s-2006 (see one of our latest speeches for a compete explanation).
U.S. Snapshot:
Despite a rise in the latest week, initial jobless claims and continued claims are trending slightly and steadily lower. Initial claims are down to 2005-2006 levels. This is good news.
The U.S. economy grew in the spring at the fastest pace since late 2011, another sign the recovery is gaining steam after a rough start to the year. Real GDP expanded at a 4.6% annual rate in the second quarter. Keep in mind that the first quarter was very weak (-2.1%) due to very bad weather in most of the country. But, the second quarter numbers were above most expectations. Real GDP now stands 2.6% above a year ago. The GDP deflator was up at a 2.1% annual rate in the second quarter and now stands 1.6% above a year ago.
Corporate profits increased 8.4% in the second quarter after a decline of 9.4% in the weak first quarter of the year. Corporate profits are up a modest 0.1% from a year ago.
The University of Michigan consumer sentiment index was 84.6 in September. This is up from 82.5 in August and 77.5 a year ago. This is a continuation of the good news in consumer confidence that is now getting back to reasonable levels after lagging for the last several years.
Durables orders fell back in August. This was to be expected after July’s surge in aircraft orders. Excluding transportation, durables orders rebounded 0.7% following a decline of 0.5% in July.
In a report that is frequently volatile, new home sales surged 18.0% in August to a much higher than expected annual rate of 504,000. This was way above expectations. Whether the strength in the August report can be extended remains to be seen.
According to CoreLogic, as of the second quarter, 10.7% of all residential properties with a mortgage still had negative equity. Another 19.0% were considered to be “under-equitied”. This means that they had less than 20% equity in their home. So, in total, approximately 29.7% of home owners with a mortgage are still not in a position to sell their home and have enough money to get back into the housing market.
Arizona Snapshot:
Statewide lodging performance improved in August versus a year ago. Occupancy was up to 55.9% compared to 54.1% a year ago.
In Greater Phoenix, 19.5% of all residential properties with a mortgage had negative equity as of the second quarter. Another 21.2% in Greater Phoenix were considered “under-equitied” by CoreLogic.
