Pollack: A surprise

 

The Source for Information and Analysis on the Arizona Economy and Real Estate

ELLIOTT D. POLLACK

& Company

FOR IMMEDIATE RELEASE
April 3rd, 2017
 
The Monday Morning Quarterback
A quick analysis of important economic data released over the past week
This week’s surprise came via the Conference Board’s consumer confidence index, which jumped to its highest level in almost 17 years.  This well exceeded expectations.  Both the “present situation” and “expectations” indices improved markedly.  The labor market portions suggested that the job market is strong.  And while a separate University of Michigan consumer sentiment index measures different things, it too has had a significant jump since the election.

While the improvement in consumer confidence since the election has been significant, it is not likely sustainable over a long period of time given the extent of this recent rise.
What is the consumer confidence index showing us, given that most of the news surrounding the Trump administration has been, at best, mixed?  Apparently, consumers think more of what has been going on and how the Trump administration is likely to handle the economy than does the press.  Consumers are happy with the direction of the economy.  They are happy about the job market.  They are happy about future prospects.  And they are happier than they have been in years.  Let’s hope the year plays out as well as consumers believe it will.
U.S. Snapshot:
  • Real GDP in 2016 was up 1.6% compared to 2015.  In 2015, real GDP was up 2.6%.  In the 4th quarter of 2016, real GDP was up at a 2.1% annualized rate and was 2.0% higher than a year earlier.  All in all, it was a mediocre year economically.
  • On the other hand, the Conference Board consumer confidence index for March was at its highest level since 2000.  The index rose from 116.1 in February to 125.6 in March.  This is much better than expected.  The index a year ago was at 96.1.
  • The University of Michigan’s consumer sentiment index for March was 96.9compared to 96.3 in February and 91.0 a year ago.
  • Corporate net cash flow rose 2.4% in 2016 compared to 2015.  In 2015, cash flow was down 1.2%.  In the 4th quarter of 2016, cash flow was up 10.9% from a year ago (see chart below).
  • Personal income in the U.S. was up 4.6% in February compared to a year ago.  It was up 0.4% from January.  Disposable personal income was up 4.4% from a year ago and personal consumption expenditures were up 4.8% from a year ago.  The personal savings rate was 5.6% in February compared to 5.4% in January and 6.0% a year ago.  These are all at satisfactory levels.
  • The S&P/Case-Shiller home price index for the 20-city index was up 5.7% from a year ago in January.  The 10-city index was up 5.1%.  Thus, housing and home prices continue on a generally upward trend.
  • The pending home sales index increased 5.5% to 112.3 in February from 106.4 in January and represents a 2.6% increase from a year ago.  February’s level is the highest reading since last April and the second highest since May, 2006.
Arizona Snapshot:
  • Arizona personal income increased 4.3% in 2016.  This is modestly lower than the U.S. counterpart.  In 2015, it grew by 4.5%.  In the 4th quarter of 2016, personal income was 4.6% over a year ago.
  • The S&P/Case-Shiller home price index for January was up 5.1% over a year ago in Greater Phoenix.  It was flat when measured against December, 2016.
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