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Pollack: Don’t panic… yet

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March 5th, 2018

The Monday Morning Quarterback

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

While the economic data released last week was generally positive, the big economic news had to do with President Trump throwing out what hopefully will be no more than a trial balloon related to increasing tariffs on steel and aluminum.  So far, there was no evidence presented that indicates such a tariff is justified.  The initial reaction was almost universally negative.  That included a decline in stock prices.

Unless it can be shown that certain countries have inflated their tariffs on U.S. steel and aluminum manufacturers or are subsidizing their local steel and aluminum manufacturers to the detriment of U.S. manufacturers, the result of a generalized increase in tariffs would be uniformly negative.  That includes higher consumer prices and, most likely, a loss of domestic jobs.

If this turns out to be more than a trial balloon, then we will start to discuss comparative advantage and other concepts that gave you headaches when you took that economics class your sophomore year.  Until we know, just assume the result would not be a win for the U.S. as a whole.  On the other hand, Trump is not a bad negotiator.  So, don’t panic…yet.

U.S. Snapshot:

  • The latest estimates put out by the Bureau of Economic Analysis show that real GDP in the 4th quarter grew at 2.5%.  This compares to earlier estimates of 2.6%.

  • Personal income in January grew by 0.4% over December (a 4.7% annual rate) and now stands 3.8% over a year ago.  This is a good number in a 2% inflation economy.  Disposable personal income grew by 0.9% for the month and now stands 4.0% over a year ago.  Personal consumption expenditures were up 0.2% for the month and up 4.4% from January 2017.  The savings rate increased to 3.2% in January.  That’s up from 2.5% in December and down from 3.7% a year ago.

  • Consumer confidence jumped in February according to the Conference Board.  Their index increased 6.5 points to 130.8.  This is the largest gain in a year.  It represents a high for this cycle.  A year ago, the index stood at 116.1.

  • The University of Michigan consumer sentiment index ended February at 99.7.  This compares to 95.7 in January and 96.3 a year ago.

  • The ISM manufacturing index indicated that the manufacturing sector continued to expand in February.  The index rose to 60.8 from 59.1 in January and 57.6 a year ago.  Any reading above 50 indicates that the manufacturing sector is expanding.

  • Manufacturers’ new orders for durable goods stood 6.8% above a year earlier in January.  For the month, orders were down 3.7%.  Non-defense orders, excluding the volatile aircraft sector, was down 0.2% for the month but was up 6.3% over a year ago.

  • Since October’s hurricane replacement sales boom, vehicle sales have been soft.  Most of the decline came in two and four door sedans.  February sales were 17.0 million units at an annual rate.  This compares to 17.1 million in January and 17.3 million in February of 2017.

  • New home sales were weak in January.  They were down 7.8% from December and were also down 1.0% from a year ago.

  • The National Association of Realtors pending sales index was also down in January.  Existing home sales were down 4.7% from December and 3.8% from a year ago.  Hopefully, this turns out to be an aberration.

Arizona Snapshot:

  • Statewide lodging numbers continued to improve.  Occupancy was 63.4% in January.  That’s up from 56.8% in December and 62.2% a year ago.  The increase was due to a 3.8% increase in demand over the past year and a 1.9% increase in supply.

  • Sky Harbor International Airport continues to get busier as well.  Enplanements were up 1.7% for the year ending January.  Deplanements were up 3.6% for the same period.  Total air traffic exceeded 3,585,000 in January.

  • According to the S&P/Case-Shiller home price index, home prices in Greater Phoenix were up 0.2% in December over November and were up 5.6% over the past year (see chart below).

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

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