Pollack: Nation survives despite current policies

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July 5th 2016
The Monday Morning Quarterback
A quick analysis of important economic data released over the past week
We hope you had a terrific 4th of July.  It’s a great time of year and a good time to remember that despite the craziness surrounding the current presidential elections, the ongoing battle with the forces of evil known as ISIS and continued problems with the economy, we are all fortunate to be living in the United States at this point in history.  An objective look at the rest of the world suggests that while we have our problems, most of us have it pretty good.  Hopefully, most of our current issues will be resolved for the better.  At least that opportunity exists.  But, it will take a lot of work, luck and better leadership than the major political parties seem to be able to show us at the present time.
Economic news over the past week has been typical of “later in the cycle” data and seems to indicate that the fears over Brexit and its effect on the American economy might have been overblown.  While the economy continues to be lethargic and the causes of that lethargy are not changing, incomes are still improving and confidence remains high.  And while the manufacturing sector remains weak, it is still improving.  Private construction is up and home prices continue to recover at a reasonable rate.
Overall, it’s about all we can expect given the nation’s present policies.
U.S. Snapshot:
  • Real gross domestic product – the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes – increased at an annual rate of 1.1% in the 1st quarter of 2016 according to the most recent estimates.  Real GDP now stands 2.1% above a year ago.  The June Blue Chip Consensus forecast suggests that 2016 will grow by 1.9%, the slowest rate of growth since 2013, and 2.3% in 2017, about the same level as 2014 and 2015.
  • Corporate profits and cash flow, while still high by historic standards, have essentially been stuck in a rut and are about the same as they were in 2010.
  • Personal income increased 4.0% for the year ending May.  They were up 0.2% over April. Growth in disposable personal income also slowed but was up 0.2% for the month and currently stands 4.1% above a year ago.  Personal consumption expenditures were up 0.4% for the month compared to 1.1% in April.
  • The Conference Board consumer confidence index jumped to 98 in June, gaining 5.6 points over the revised May figure.
  • The ISM manufacturing index stood at 53.2 in June.  This was up from 51.3 in May.  A reading of above 50 suggests that the manufacturing sector is expanding.
  • The U.S. S&P/Case-Shiller national home price index reported a gain of 5.4% in April (20 city composite index).  As the index continues to increase, more home owners with mortgages will have equity and will be able to sell their homes or be able to refinance.
Arizona Snapshot:
  • The same Case/Shiller index discussed above increased 5.5% for Greater Phoenix.  The index now stands at 158.73 compared to the previous peak in June 2006 of 227.42.
  • Again, as prices gradually increase, fewer homeowners with a mortgage will be under water and their home will again become a valuable asset.

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