The Monday Morning Quarterback / A quick analysis of important economic data released over the past week
Elliott D. Pollack & Co.
It was an unusual week for the stock market. A significant decline followed by big gain on Friday. Listening to the talking heads on the financial networks is interesting, but, terribly uninformative. The reasons given went all the way from Ebola to the slowdown in Europe to reduced expectations for corporate earnings. It is most likely related to the likelihood that central banks, for the first time since 2008, might not be in lock step going forward. Europe and China are likely to push harder on quantitative easing. The U.S., where the economy seems stronger (although still below normal growth rates for this point in the cycle) is likely to ease off a little. Don’t expect major increases in rates, though.
The real answer is that no one knows for sure why the market does what it does on a daily basis and it is almost impossible to forecast on a short term or even intermediate term basis. If you are a long-term investor either personally or through your retirement accounts and have more than a decade before you will retire, turn off the financial networks and watch a ball game. Calling turns in the market on a short-term basis is a fool’s game for most people. Sometimes the market will go up. Sometimes multiples are high and it is overvalued. But, keep in mind what you are doing. Remember, you are investing in the long-term growth of the U.S. economy. In the long run, that’s a great bet. Don’t let swings in the market, especially if you don’t need the money for years, concern you.
Now that the public service announcement is over, we can get back to the economy.
U.S. Snapshot:
Boosted by the improving jobs market and lower gas prices, consumer sentiment, as measured by the University of Michigan, rose 1.8 points in October to 86.4. This is up 2.1% from a month ago and 14.9% from October 2013.
As expected, auto sales and gasoline sales tugged down on retail sales in September. But the core numbers were weaker than expected. Retail sales in September declined 0.3% after a jump of 0.6% in August. Analysts forecasted a 0.1% dip for September.
The inventories/sales ratio for manufacturing and trade were flat at 1.29 in August indicating that sales and inventories are in line.
Industrial production for September topped expectations. It jumped a large 1.0% last month after a decline of 0.2% in August. Utilities and manufacturing were solid.
Capacity utilization rose to 79.3. This is near levels that have historically been associated with increases in plant spending and suggests that the economy is healthy.
After four consecutive monthly gains, homebuilder confidence fell five points to 54 on the NAHB/Wells Fargo Housing Market Index. This is the same as the level reached a year ago.
National housing data continue to be volatile. Starts and permits rebounded in September after declines in August and after sharp gains in July. The multifamily component rebounded a monthly 16.7% after plunging 28.7% in August. The single family component rose 1.1% in September following a 2.0% dip in August. Total permits were below expectations.
Arizona Snapshot:
The seasonally adjusted unemployment rate in Arizona dropped 0.2% from 7.1% in August to 6.9% in September. In Greater Phoenix, the unemployment rate was 5.8% and Greater Tucson posted 6.0% in September.
Employment in the state is up 53,200 jobs or 2.1% compared to a year ago. On a year to date vs. year to date basis, the state is up 1.9% – not a stellar performance.
Employment in Greater Phoenix grew by 2.2% on a year to date vs. year to date basis. From September of 2013, Greater Phoenix has added 41,200 jobs for a gain of 2.3%. Every sector except construction was up. The biggest gainers were education and health services, professional and business services, leisure and hospitality and financial activities.
Employment in Greater Tucson was up 6,100 jobs or 1.7% vs. a year ago. On a year to date vs. year to date basis, Tucson is up a very modest 1.3%.
According to R.L. Brown and the R.L. Brown Housing Report, new home permits dropped to 915 in September. This compares to 897 in September 2013. New home sales were 956 in September. That’s up from 911 in August, but, down from a year ago.
According to Cassidy Turley, office vacancy rates declined to 19.6% in the third quarter of this year compared to 21.2% a year ago. Retail vacancy declined from 12.3% to 11.9% over the same period and industrial vacancy rates went from 12.9% to 11.2% in the third quarter compared to a year ago.
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