ELLIOTT D. POLLACK
FOR IMMEDIATE RELEASE
July 31st, 2017
The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
Last week’s news about the economy was quite positive. This suggests that the mixed news of a few weeks ago was an aberration. And this good news about the economy comes before any action on the Trump’s economic agenda that would undoubtedly spur growth out of the 2%+ rut it has been stuck in for years. Of course, that assumes that some type of meaningful economic plan does get passed. Time will tell. Overall, the data suggests that consumers are spending more, businesses are spending more, inflation is under control, consumer confidence is increasing and housing prices, by all measures, continue to increase at a rate of 5-7% above year earlier levels. Locally, tourism continues to expand. Given that the U.S. economy is in the 96th month of the current recovery/expansion making this is the third longest recovery/expansion in post war history, this is very healthy.
Real GDP increased at an annual rate of 2.6% in the second quarter of 2017. In the first quarter, real GDP increased 1.2%. The increase in the second quarter reflected positive contributions from personal consumption expenditures, nonresidential fixed investment, exports and federal government spending. This was partially offset by negative contributions from private residential fixed investment (housing) and private inventory investment. Blue Chip estimates call for real GDP to expand at a 2.2% annual rate in 2017 and a 2.4% annual rate in 2018.
The GDP price deflator increased at a modest 1.0% annual rate in the second quarter and now stands only 1.6% above year earlier levels.
Both major measures of consumer confidence were reported to have moved up in the most recent readings. The Conference Board index rose to 121.1, a gain of 3.8 points from June. A year ago, the reading was 96.7. The University of Michigan consumer sentiment index edged higher the last two weeks of July and produced a final reading of 93.4 vs. 93.1 at mid-month (see charts below).
Manufacturers’ new orders for durable goods were up 6.5% from May and now stand 16.1% above year earlier levels. Non-defense goods excluding aircraft were down 0.1% from May but were still up 5.6% from a year ago in June.
Housing prices rose in all the major measures that came out last week. According to the FHFA housing price index, housing prices rose 0.4% in May and are now 6.9% above a year ago. According to the S&P/Case-Shiller national home price index composite for 20 cities, prices increased 0.8% in May over April and are 5.7% above a year ago. According to the National Association of Realtors, the median price of an existing single family home sold in the U.S. in June stood 6.6% above year earlier levels. Interestingly, the only price decline came in the median price of new home sales. They declined 3.4% from a year ago. This is a positive. Home builders have been struggling to deliver less expensive (more affordable) product as buyers who look for affordability are buying lesser expensive models. Overall, housing prices of existing homes in the U.S. continue to rise at nearly three times the rate of inflation.
The number of people who enplaned at Phoenix Sky Harbor International Airport increased by 1.6% in June when compared to a year ago. The number who deplaned increased by 0.2%. Overall, total air traffic in June stood 0.9% above a year ago.
Statewide lodging performance continued to improve in the second quarter of 2017. Occupancy increased 2.4% from year earlier levels. This was the result of a 3.7% gain in demand and a 1.2% increase in supply over the same period.Overall, occupancy in the state stood at 67.7% in the quarter compared to 66.1% a year ago.
Metro Phoenix lodging performance was not as strong. Occupancy was down 0.5% from year earlier levels in the second quarter, 67.1% vs. 67.4% a year ago, due to a 1.6% increase in demand and a 2.1% increase in supply.
According to the S&P/Case-Shiller home price index for Greater Phoenix, home prices in May were up 0.6% from April levels and 5.7% from year earlier levels.
Elliott D. Pollack & Company (EDPCo) offers a broad range of economic and real estate consulting services backed by one of the most comprehensive databases found in the nation. This information makes it possible for the firm to conduct economic forecasting, develop economic impact studies and prepare demographic analyses and forecasts. Econometric modeling and economic development analysis and planning are also part of our capabilities. EDPCo staff includes professionals with backgrounds in economics, urban planning, financial analysis, real estate development and government. These professionals serve a broad client base of both public and private sector entities that range from school districts and utility companies to law firms and real estate developers.
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