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Pollack: Unless policies change, it will be more of the same

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ELLIOTT D. POLLACK & Company

FOR IMMEDIATE RELEASE
September 12th, 2016
 
The Monday Morning Quarterback
A quick analysis of important economic data released over the past week
No disappointments this week. While the employment numbers from last week left a bad taste in people’s mouths, it was only because the expectation was not reached. Those numbers have been bouncing around but generally have been satisfactory given the slow rate of growth that present policies have generated.
Don’t be fooled by the rhetoric from either party. The economy is cyclical. Neither party alone can be blamed for the Great Recession. That was created over several administrations. It just happened to come home to roost during George W. Bush’s second term.  It could have just as easily slipped to Obama’s first term.
As for the recovery, the normal anticipation recovering from a very weak cycle would have been a very strong recovery. Even with the hangover from the near financial meltdown (financial meltdowns take a long time to work themselves out) the recovery has been very slow. One side can take more of the blame than the other for this, but clearly it isn’t entirely the bad policy of just one party.
One thing that is clear, though. Unless policies change, it will be more of the same. Like frogs in cool water, we will be paralyzed once the heat is turned up for any significant period of time.
Expectations for growth remain modest to moderate. The non-manufacturing sector continues to expand, but, modestly so. Consumers are using their credit cards, but, at what historically has been a conservative rate. Mortgage rates remain flat. And the Arizona single family housing market continues to do relatively well.
Despite the slow going, we are still going. No obvious signs of the end of the cycle at this point. That’s good news.
U.S. Snapshot:
  • The latest Blue Chip consensus forecast calls for real GDP growth of 1.5% this year and 2.2% next. That would be just about an average year since THIS recovery began in 2009.
  • The ISM’s non-manufacturing index slipped to 51.4 in August. This is down from 55.5 in July and 58.3 a year ago.  Any reading of above 50 suggests that the non-manufacturing sector is expanding. The past relationship between the NMI and the overall economy indicates that the NMI for August corresponds to a 1% increase in real GDP on an annualized basis.
  • Consumer credit posted strong growth overall. However, revolving credit (such as credit cards) showed signs of slowing.  Non-revolving credit (such as vehicle financing and student loans) continues to perform very well (see chart below).
  • Mortgage rates averaged 3.44% according to Freddie Mac for the week ending September 8. Rates have been at this level since from the last month (see chart below).
Arizona Snapshot:
  • According to the Cromford Report, active listings in Greater Phoenix are up 4.3%from a year ago but down 3.0% from last month.  On the other hand, single family resales are up 13.3% from a year ago and up 2.5% from last month. As a result, month’s supply of residential listings in now down to 2.9 months compared to 3.2 a year ago and 3.0 in July. Median resale prices are up 8.5% from a year ago and average days on market is up to 74.3 days from 72.7 a year ago.
  • Foreclosures in Maricopa County are now down to levels that were normal prior to 2005 (see chart below).
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