Pollack: The economy contracted in the first quarter, but don’t worry


The Monday Morning Quarterback

A quick analysis of important economic data released over the last week

By Elliott D. Pollack and Company

The glamorous field of data analysis yielded another interesting week of interpretation.  First, the GDP numbers for the first quarter were revised to -0.7 percent.  The previous reading was for very weak growth of 0.2 percent. This means the economy actually contracted in the first quarter.

Also, this means nothing. This is not the beginning of a recession.

We went through this last year.  Cold weather kept people from buying stuff because it is not worthwhile to drive to Target or Wal-Mart and buy towels, picture frames and deodorant (even on sale) when it takes a couple of hours to dig the car out of the snow. Same thing goes for this year.

It is similarly difficult on the business side, especially when the dollar strengthens and ports reduce processing.  There is even some speculation that some of the math may have simply been miscalculated.  We will have to wait and see how the numbers are revised later.

The current speculation is that the second quarter will post growth of between 2 percent and 3 percent. Don’t be surprised if it is on the high side.  It is easier to post stronger rates of growth following a quarter like we just went through.

Other indicators are showing signs of growth rather than recession. Overall, expect a decent summer.

Arizona Snapshot:

  • The Rocky Mountain Poll suggests consumer confidence in the Arizona economy remains unchanged this quarter.  The index remained at 79.1 percent. Maricopa County and rural counties saw marginal improvements in the confidence index. However, Pima County confidence declined and continues to be low (see chart below).
  • Statewide lodging performances continue to show improvements. Occupancy rates in April were 67.2 percent compared to 66.2 percet a year ago. Demand was up 1.6 percent while supply remained unchanged over the prior year.

U.S. Snapshot:

  • Consumer Confidence is at 95.4 for May of this year.  A reading of 100 is what is considered “normal.”  Normal is defined as a point in time from the 1980’s.  This doesn’t mean a lot, but it does give a point in time reference and a way to interpret the index.
  • According to the National Association of Realtors, the Pending Homes Sales Index rose in April for the fourth straight month and reached its highest level in nine years. The index increased a higher than expected 3.4 percent in April and is now 14 percent above April 2014.
  • Sales of new homes bounced back in April, up 6.8 percent from March and 26.1 percent above the April 2014 estimate. The median price of new homes increased 4.1 percent over the month to $297,300 for a strong 8.3 percent year-over-year increase. Readings in this report are always volatile on a monthly basis, but the gains for April help offset last week’s disappointing weakness in existing home sales.

Pollack graph

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