ELLIOTT D. POLLACK & Company
FOR IMMEDIATE RELEASE
October 30th, 2017
The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
While there wasn’t a large amount of data released last week, what was released was significant. First, real gross national product was up at an annualized rate of 3.0% in the third quarter. This is after a growth rate of 3.1% at an annual rate in the second quarter. This marks the first time the economy has grown at or above 3.0% annual rate for two consecutive quarters since the middle of 2014. It is also surprising since major hurricanes struck Houston and Florida during the quarter.
Most economists expected the quarter to be weaker because of the effects of those hurricanes on the quarter. As it turned out, consumer spending continued to grow at a solid pace despite some economic disruptions caused by Hurricanes Harvey and Irma. Strong September auto sales numbers indicate that those disruptions were temporary. Housing continued to retreat, but, the process of post storm rebuilding in Texas and Florida could also help drive a recovery next quarter.
The biggest surprise, though, was that business investment grew by an average of 5.3% at an annual rate during the past two quarters even as investment related to energy exploration declined. It appears that consumers are not the only sector of the economy where confidence is high. Business invested more in machinery, equipment and warehouse facilities than expected. This is clearly good news.
It also brings us to the second piece of significant information released last week. According to the University of Michigan, consumer sentiment rose to the highest level of this cycle last month. Indeed, it was the highest reading since 2004. This reflected strong readings related to personal finances. Thus, going into the Christmas season, there is strength in both consumers and business. On top of that, it appears that some type of tax cuts are likely to be passed before the end of the year….maybe…hopefully. Given all of this, it could be a very good Christmas season for retailers.
How much of this pretty picture belongs to Trump as opposed to the residual of Obama is an interesting question. Clearly, the majority of the changes that the Trump administration is expected to bring in remains in front of us. Given the track record so far, it remains to be seen how much of the package gets through. That being said, it is clear that the overall tenor of the current administration is pro-business and pro-growth. These attitudes have resulted in a higher level of confidence on the part of consumers and business. It has resulted in less growth in regulation, which appears to be the area where the President receives the highest approval rating. That, combined with the strong stock market (too strong perhaps), higher incomes, a modest level of inflation and continued job growth suggests that the next year could see a continuation of what is now a 100-month old expansion, the third longest recovery and expansion in U.S. history.
U.S. Snapshot:
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As discussed, the Bureau of Economic Analysis reported a 3.0% annualized growth in real Gross Domestic Product for the third quarter of 2017. This is the first time the economy has grown at or above 3% (annual rate) for two consecutive quarters since the middle of 2014. This indicates several things. First, hurricanes Harvey and Irma did not have as negative an effect on the economy as originally feared. Second, investment and trade data suggest that the U.S. economy is well situated to continue to grow in 2018.
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The University of Michigan Consumer Sentiment Index for October was very strong. The index rose to 100.7 (see chart below). This compares to 95.1 in September and 87.2 a year ago.
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New orders for durable goods rose 2.2% for the month in September and now stand 8.3% above a year ago. Even excluding the volatile aircraft sector, durable goods orders are up 7.8% from a year ago. This is a strong showing.
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Sales of new single family homes in September were at a seasonally adjusted annual rate of 667,000. This compares to 561,000 in August and 570,000 a year ago.
Arizona Snapshot:
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According to ABI Multifamily, 2,598 units (10 properties) were completed in the 3rd quarter of 2017 in the Greater Phoenix area. Year-to-date, construction has been completed on 6,012 units. This compares to a long term average of 5,381 a year. There are currently 69 properties under construction totaling 17,360 units. There are 56 additional properties planned (11,717 units) in the Phoenix metro area.
About EDPCo
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.
For more information, contact –
Elliott D. Pollack & company
7505 East Sixth Avenue, Suite 100
Scottsdale, Arizona 85251
480-423-9200
