ELLIOTT D. POLLACK & Company
FOR IMMEDIATE RELEASE
May 16th, 2016
The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
The economy continues to crawl along complements of several factors, not the least of which is Dodd-Frank. It would be humorous that Congress passed legislation that keeps banks from lending on certain types of mortgages while the Fed does all it can to get banks to lend were it not for the human tragedy caused by a sub-par recovery. This will prevent the usual boom in economic activity that historically has occurred late in a cycle.
On the other hand, the normal imbalances that cause an aging expansion to become suspect have not yet become obvious, with the exception of very high inventories to sales ratio in autos. Thus, it will be more of the same: anemic growth, but, growth nonetheless.
The recovery/expansion is now in month 84. That makes it the third longest of the ten expansions since 1954. In fact, expansions of this length have, historically, been the exception, not the rule. Thus, while this cycle has been horribly slow, it is still going.
U.S. Snapshot:
- The latest Blue Chip consensus forecast now believes that real GDP will grow a slow 1.8% in 2016. This is down almost .05 points over the past few months. The good news is that the consensus for 2017 is 2.3% (see chart below). While that is still weak, it suggests that the troubles experienced by the economy in the first quarter of this year should prove to be transitory.
- Total manufacturing and trade sales in March were up 0.3% from February but down 1.7% from a year ago. Inventories, on the other hand, were up 0.4% for the month and 1.5% over a year ago. Thus, while the inventories to sales ratio was 1.41 in both February and March, it is higher than the 1.37 of a year ago. This suggests that at some point, either sales have to pick up more than inventories or production of new inventories have to slow at least temporarily. This would lead to a slowdown in hiring.
- The advanced estimate for retail and food sales in April, adjusted for seasonal variations and holiday and trading day differences, but not for price changes, increased 1.3% over March and 3.0% over a year ago.
- The University of Michigan consumer sentiment index jumped up to 95.8 in May up from 89.0 in April and 90.7 a year ago. This is a big jump and the best reading since June of last year.
- Mortgage rates for a 30-year fixed-rate mortgage stood at 3.57% for the week of May 12. This is about the same as the previous week 3.61% and 3.58% a month ago.
- The U.S. housing opportunity (affordability) index was 65.0% in the 1st quarter. This compares to 63.3% in the 4th quarter of 2015 and 66.5% a year ago. Thus, housing affordability remains a positive.
Arizona Snapshot:
- Housing affordability in Greater Phoenix was 70.3% in the 1st quarter. This compares to 68.2% in the 4th quarter and 70.2% a year ago. Greater Phoenix remains one of the most affordable places to live in the Southwest (see chart below).
- According to ARMLS (the multiple listing service in Greater Phoenix) 6,947 single family homes sold in Greater Phoenix in April with a median sales price of $235,500. This compares to 6,910 sales with a median price of $217,000 a year ago. In Greater Tucson, 1,181 single family units sold with a median price of $192,500 compared to 1,089 units with a median price of $185,000 a year ago.
- According to Chief Executive Magazine, their 12th annual survey of CEO’s on the best and worst states for business ranked Arizona 6th in the nation behind perennial leaders Texas and Florida. This is a good showing.
