Economy begins the year in several ways

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January 11th, 2016
The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
The first full week of 2016 contained the good, the bad and the ugly. As for the good, the employment data was better than expected; it suggests that the economy will continue to grow. The consensus forecast for real GDP for 2016 didn’t change very much from last month. And construction spending was up. As for the bad, manufacturers’ new orders were down for the month and stand well below a year ago, auto sales were weak and manufacturing contracted in December. As for the ugly, the stock market had the largest first week decline in memory. Worries about China continue to abound. And the circus that has been the geopolitical scene for far too long seemed to get worse. Despite all of this, the economy should continue on a path that makes 2016 slightly better than 2015.
U.S. Snapshot:
  • Total nonfarm payroll employment rose by 292,000 in December and the unemployment rate was unchanged at 5.0%. Employment gains occurred in several industries led by professional and business services, construction, health care, and food services & drinking places. Mining employment declined. (See chart below).
  • The consensus forecast for real GDP growth was unchanged last month at 2.5%.
  • New orders for manufactured goods in November, after being down three of the last four months, declined again by 0.2% and now stand 4.2% below a year ago. This decline compares to a gain of 1.3% for the month in October. The inventories/shipments ratio was 1.35, down from 1.36 the previous month as inventories, like orders, declined.
  • Auto and light truck sales fell a sharp 4.7% in December. Cars were the weakest, down 5.2%. But, truck sales, which had been strong through most of 2015, also fell in December (down 4.2%). Since vehicle sales make up about 20% of total retail sales, the weakness will make it hard for December to show any lift.
  • The ISM manufacturing index fell to 48.2 in December, down from 48.6 in November. This is the second month in a row when the index was below 50.  Any reading below 50 indicates that manufacturing is contracting. This is the lowest reading since June 2009. Despite this, the overall economy expanded for the 79th consecutive month. The ISM non-manufacturing index in December was at 55.3. While this is down from 55.9 in November, it was the 71st consecutive month of expansion for the non-manufacturing sector.
  • While construction spending was down 0.4% from the previous month in November, it was 10.5% above a year ago. Both private and public construction were slightly down for the month.
Arizona Snapshot:
  • According to a study by United Van Lines, Arizona ranked 10th out of the 48 contiguous states in terms of inbound migration relative to outbound migration in 2015.  In terms of the net number of inbound migrants, the state ranks 7th.  Florida ranked 1st.
  • The housing market in Maricopa County continued to improve in December. Resales were up 14.7% over a year ago. The median sales price was $230,000 vs $210,000 a year ago. New sales volume was up 44.9% over a year ago.
  • Total residential sales in Tucson were up 15.9% from a year ago. Prices were up to $176,000 from $165,000 over that period.
  • According to Berkadia Phoenix, 4th quarter apartment vacancy rates fell to 5.6%, down from 5.9% a year ago.  Rents averaged $914 which is 6.2% above a year ago.
  • Berkadia also reported that apartment vacancy rates in Tucson were 7.9% in the 4th quarter, down from 8.2% a year ago.  Rents, at $676, were about 2.3% above a year ago.


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