Pollack: 2016 growth to be slow


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February 1st, 2016
The Monday Morning Quarterback
A quick analysis of important economic data released over the past week
If the President is looking for legacy as far as the economy is concerned, the word “tepid” will forever be included.   It turns out that 2015, as measured by 4th quarter GDP data, went out with a whimper.  Given the weakness in the 1st quarter of last year, that’s also the way it came in.  Employment performance paints a different picture but there might be issues on the near term horizon given recent unemployment insurance weekly claims data.
Either way, the rate of growth in economic activity continues to be slow.  The expectation is that slow growth will likely be the case in 2016 as well.
U.S. Snapshot:
  • Real GDP increased by 0.7% in the 4th quarter of last year.  In the 3rd quarter, it increased by 2.0% (see chart below).  Expectations were for a growth rate of 0.8%.  For the year as a whole, the economy grew by 2.4%.  This is the same level as 2014.
  • The slowdown was a result of several factors.  Exports fell and imports rose due to the strength of the dollar.  That subtracted about 1/2 of 1% from economic growth.  Business reduced investment in inventories which had grown too high over the year.  Nonresidential investment also fell due to a downturn in factory output.  Consumers slowed their rate of spending.  The big positive was residential investment.
  • New orders for manufactured durable goods declined in December by 5.1%.  This is the 4th decline in the last 5 months.  Durable goods orders are now 0.6% below a year ago.
  • The Conference Board consumer confidence index rose 1.8 points to 98.1 in January.  The index is holding in the upper 90’s where it has been most of the last year.  The University of Michigan consumer sentiment index declined very slightly in January to 92.0.  This is down from 92.6 in December.
  • 30-year mortgage rates averaged 3.79% for the week ending January 28th.  This compares to 3.81% the previous week.
  • According to the S&P/Case-Shiller index, housing prices as of November were 5.8% above year earlier levels as measured by the 20-city index.
  • The national homeownership rate continues to be weak.  As of the 4th quarter, the rate was 63.8% compared to 63.7% in the 3rd quarter and 64.0% in the 4th quarter of 2014.
Arizona Snapshot:
  • According to the S&P/Case-Shiller index for Greater Phoenix, home prices in November were 5.9% above a year earlier and 0.3% above October.
  • The Arizona homeownership rate sank to 61.7% in 2015 compared to 63.5% in 2014 and 71.6% in 2006.  These numbers are both disappointing and surprising.  Hopefully, as time passes and more people are no longer in their lockout period (due to either foreclosure or short sale), the homeownership rate will start to climb.  That would help create a more stable housing market and economy.
  • The homeownership rate in Greater Phoenix rose in the 4th quarter to 60.9%.  This is up from 60.5% in the 3rd quarter.  But, for the year as a whole, it was 61.0%, down from 61.9% in 2014.  In Tucson, homeownership was 58.5% in the 4th quarter, down from 60.6% in the 3rd quarter and 61.5% for the year as a whole, down from 66.7% in 2014.
About EDPCo
Elliott D. Pollack & Company (EDPCo) offers a broad range of economic and real estate consulting services backed by one of the most comprehensive databases found in the nation. This information makes it possible for the firm to conduct economic forecasting, develop economic impact studies and prepare demographic analyses and forecasts. Econometric modeling and economic development analysis and planning are also part of our capabilities. EDPCo staff includes professionals with backgrounds in economics, urban planning, financial analysis, real estate development and government. These professionals serve a broad client base of both public and private sector entities that range from school districts and utility companies to law firms and real estate developers.  
For more information, contact –
Elliott D. Pollack & company
7505 East Sixth Avenue, Suite 100
Scottsdale, Arizona 85251
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February 2016