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Pollack weighs in on Brexit

 
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The Source for Information and Analysis on the Arizona Economy and Real Estate
EDP LogoELLIOTT D. POLLACK

& Company

FOR IMMEDIATE RELEASE
June 27th 2016
 
The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
It seems Google traffic of the term “Brexit” has skyrocketed after everyone noticed their 401k balances dip before the weekend. Active stock market investors crave known facts and Britain’s exit from the European Union created the opposite. With uncertainty comes volatility and also a flight to safer investments.
It also created a mixed bag for U.S. consumers.  Along with falling stock prices, we have also witnessed lower oil prices and declining mortgage rates. The strengthening of the dollar hurts U.S. exports but creates an opportunity for more affordable overseas travel.

At this stage, it is way too early to say where the markets will be heading as the political maneuvering unfolds, but the market is an extremely poor predictor of underlying fundamental economic conditions.  So far, the disruption in the market due to Brexit is not even as big as other events in the past year like the turmoil caused by reports of China’s slowing economy, their own stock market crash, and plummeting oil prices. These types of shocks create headwinds for an economy still in recovery, but it shouldn’t derail our long term trajectory.

U.S. Snapshot:
  • Initial claims for unemployment insurance are down 18,000 for the week of June 18th, representing a 6.5% decline from a week ago and a 4.8% decrease from last year. This is welcome news and a sign of solid improvement in the job market for the month of June. Jobless claims are now at historic lows and trending lower.
  • Manufacturers’ new orders for durable goods orders were down 2.2% for the month but still stand 3.2% above a year ago.  Durable goods orders excluding aircraft were down 0.7% for the month and 3.6% for the year.
  • Gas prices for the week of 6/20 were down 1.8% from the previous week and 15.2%below year earlier levels.
Arizona Snapshot:
  • Arizona’s weekly unemployment claims climbed 2.5% compared to the week prior but stand 4.4% below last year.
  • Arizona’s Joint Legislative Budget Committee reported May General Fund revenue growth of 4.6% over the prior year.  This was below expectations.  Individual income tax collections were strong but offset by declines in corporate income tax collections (much of which is attributed to the reduction in the corporate income tax rate). Sales tax grew by 3.4%.
  • Statewide lodging occupancy increased by 2.6%. Demand increased by 2.9% while supply increased slightly by 0.3%.
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