Pollack: Positives substantially outweigh the negatives



December 4th, 2017

The Monday Morning Quarterback

A quick analysis of important economic data released over the last week

And the beat goes on. It was another good week for the economy. The stock market continues to set new highs. The Senate passed tax cuts along party lines. Now, the House and Senate bills will be reconciled and the new tax law will go into effect. This should stimulate the economy sufficiently to make 2018 a better year than 2017.  The longer run effects should also be positive.

This stimulus comes late in the cycle. As we pointed out a few weeks ago, this is the third longest recovery/expansion in U.S. history. If all continues to go well, by this time next year, it will be the second longest.  If the expansion lasts until mid-2019, it will be the longest recovery in U.S. history. To this point, it has also been the slowest.  Going forward that might change. It remains to be seen how the late cycle stimulus plays out.  Time will tell. But, the near terms has become more positive.

This brighter outlook comes on top of continued growth in corporate profits, the highest level of consumer optimism in 17 years, real personal income growth and growth in personal consumption expenditures in excess of growth in personal income. In addition, the manufacturing sector continues to expand as does construction spending.

There are still questions we have about potential problems facing the economy. Is the stock market too high? Can consumers sustain growth in spending? Will the vitriol in American politics poison the party? Will the new stimulus work?

Right now, it looks like the positives substantially outweigh the negatives. There is always room for caution.  But, as for now, enjoy the moment and 2018.

U.S. Snapshot:

  • Consumer confidence rose again in November according to the Conference Board. It gained 3.3 points rising to 129.5 compared to 126.2 in October and 109.4 a year ago. It is at its highest level since December 2000.  Consumers feel better about their present situation, economic expectations and labor markets.
  • Personal income rose 0.4% in October and now stands 3.4% above a year ago. Disposable personal income rose 0.5% from September and was up 3.2% over a year ago. On the other hand, personal consumption expenditures rose 0.3% in October when compared to September and were up 4.2% over a year ago. As a result, the personal savings rate declined from 4.1% a year ago to 3.2% in October.
  • Corporate profits in the third quarter of 2017 were up 4.3% over the second quarter of the year and were up 5.4% over a year ago. Net cash flows did not fare as well in the quarter. They were down 1.7% from the second quarter but were up 1.1% from a year ago. The significant cut in corporate tax rates (35% to 20%) that now seem likely should stimulate after tax corporate profits over the next year. Perhaps this explains the seemingly very high (by historic standards) price/earnings multiple the stock market now carries. That seemingly overblown multiple is the only noteworthy sign of trouble on the horizon. The tax cut could help mitigate that issue. We have seen no credible analysis of that issue to date. That will probably change very shortly.
  • The ISM’s manufacturing index continued to show strength in November. While down for October’s 58.7 to 58.2 in November, the index is still well above 50. That is the level that signifies expansion in the manufacturing sector.
  • Construction spending expanded in October. Total construction spending rose 1.4% in the month and stood 2.9% above year earlier levels. Private sector construction was up 3.2% for the year.  New single family construction was up 0.3% for the month and was 8.9% above a year ago. New multifamily construction was down 1.6% from September and was down 2.0% from a year ago.
  • Sales of new single family houses in October were at a seasonally adjusted annual rate of 685,000. This is 6.2% above September and 18.7% above a year ago.
  • The S&P/Case-Shiller home price index reported a 6.2% annual gain in September up from 5.9% the previous month.

Arizona Snapshot:

  • The number of people who deplaned at Sky Harbor International Airport in October rose 2.3% from a year ago while the number who enplaned rose 2.5% over the same period. This is good news for tourism.
  • The Greater Phoenix S&P/Case-Shiller home price index shows home prices up 6.1% in the valley over the past year.

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

Share this!

Additional Articles

Get Our Twice Weekly Newsletter!

* indicates required

Rose Law Group pc values “outrageous client service.” We pride ourselves on hyper-responsiveness to our clients’ needs and an extraordinary record of success in achieving our clients’ goals. We know we get results and our list of outstanding clients speaks to the quality of our work.

News Categories