Pollack: Congress–‘2018 was supposed to be a different story’

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April 17th, 2017
The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
Last Week’s data support two trains of thought that have been circulating over the past week or so.  The first has to do with the increasing possibility that not enough of President Trump’s economic and tax package will make it through congress to allow the positive impacts on growth hoped for to take place.  This has resulted in many economists lowering their real GDP estimates for 2017 and 2018.  Actually, there was never a realistic chance that the package would get through Congress early enough in 2017 to have a major impact.  But, 2018 was supposed to be a different story.
The second is tied to the first.  It suggests that the continued strength in labor markets and a high level of consumer confidence will not translate into more consumer spending.  Given the weakness in the recent retail sales numbers, this is certainly a possibility.  The result of these two things could cause a retrenchment in the stock market, a reduction in confidence and a continued slower than normal rate of economic growth.  Overall, the passage of the major parts of the economic and tax package would need to get through congress in order to see the improvements in the economy that most people, based on surveys, expected upon Trump’s election.  It is still early in the game and no one knows how it will play out.  But, doubts are beginning to set in.  Only time will tell.
U.S. Snapshot:
  • The latest Blue Chip consensus forecast calls for real GDP to grow by 2.2% in 2017 and 2.4% in 2018. Almost 75% of the panelists predict the Fed will enact two additional 25 basis point interest rate increases this year.  80% predict the next hike will come at this June’s meeting.  About 50% of the panelists forecast another 75 basis points of rate hikes in 2018, while a bit more than 36% see 100 basis points of tightening next year.  The consensus puts the odds at just a bit more than 50% that congress will approve corporate tax cuts this year while probabilities of individual tax cuts is a bit less than 50%.
  • The University of Michigan consumer sentiment index increased in April to 98.0.  This was up from 96.9 in March and 89.0 a year ago.
  • Retail sales (including retail and food services sales) for March declined by 0.2% from February but were up 5.2% from a year ago.  Seasonally adjusted retail sales declined in by 0.3% in February compared to January.
  • Manufacturing and trade inventories and sales were both up in February when compared to January. Total sales were up 0.2% for the month and were 7.1%above a year ago.   Inventories were up 0.3% for the month and were 2.8% above a year ago.  The manufacturing and trade inventories to sales ratio remained at 1.35.
  • Consumer prices declined in March when compared to February.  This was unexpected.  All items were down 0.3% and were 2.4% above a year earlier.  All items less food and energy were down 0.1% and were 2.0% above a year ago.
Arizona Snapshot:
  • According to the Home Builders of Central Arizona (Greater Phoenix), building permits were up 14.4% in March 2017 (1,962 permits) compared to March 2016 (1,715).  For the first three months of the year, permits were up 9.0%.  A total of 4,647 permits were issued during that period compared to 4,264 for the same 2016 period.
  • According to the Information Market, the median price of a resale home in Maricopa County rose 6.0% in March 2017 compared to March 2016.  That’s $230,000 compared to $217,000.  New home prices were up 1.7% versus a year ago in March to $320,437.
  • According to RealData, apartment rents in Greater Phoenix averaged $917 in the first quarter of 2017 compared to $871 a year earlier.  That’s a 5.3% increase.  Vacancy rates were at 7.0% in the first quarter compared to 7.3% in the fourth quarter and 7.0% a year ago.
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