ELLIOTT D. POLLACK
FOR IMMEDIATE RELEASE
November 13th, 2018
The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
Due to the Veteran’s day holiday, the Monday Morning Quarterback became the Tuesday Morning Quarterback this week. Hope it’s still useful to you.
Obviously, both parties had good things to say about the election results. Democrats took control of the House. Republicans retained control of the Senate. Such a midterm shift in power in Washington has become more the norm than the exception over the last several decades. Perhaps the American people see gridlock in Washington as the favored outcome. Anyway, the next two years should continue to be interesting.
As for the effect on the economy, the tax cuts will continue for the next two years at least and the move towards a less overregulated environment is also likely to continue. On the other hand, any significant legislation is likely to be tougher to come by. Hopefully, there can be some consensus on the need for infrastructure spending and immigration reform. But, who knows.
What we do know is that the economy continues to do well. The consensus from economists is that 2018 will continue to be strong and that while 2019 is expected show a slower rate of growth, it will still be a good year. Consumer sentiment remains positive. And consumers are entering the holiday season with higher incomes and an apparent willingness to purchase with credit. The non-manufacturing sector remains vibrant as well.
As for Arizona, while the number of resales in Greater Phoenix has slowed modestly, it is probably due to a decline in active listings. Indeed, the average days on market for a resale home continue to decline. The picture remains a positive one.
The latest U.S. Blue Chip consensus forecast for real GDP is largely unchanged. Real GDP for 2018 is expected to increase by 2.9%. For 2019, the increase is expected to slow to 2.6%. On a quarterly basis, real GDP growth is expected to taper from the 2.7% expected this quarter to 2.0% by the 4th quarter of 2019. Current dynamics, while very strong, do not suggest that the economy is likely to accelerate further. In fact, the Blue Chip panel looks for slower growth. Notably, its outlook calls for slower growth but certainly not a dramatic drop off.
The University of Michigan Consumer Sentiment Index was about flat in November when compared to October. The November index stood at 98.3 compared to 98.6 in October and 98.5 a year ago. Modest gains in current household finances were offset by a modest slide in expectations. Overall, the outlook remains good.
Consumer credit increased at a 3.3% annual rate in September and now stands 4.8% above year earlier levels. As has become the norm in this cycle, revolving credit (credit cards) rose at a more modest rate than did non-revolving credit (auto and student loan debt). Revolving credit declined at a 0.4% annual rate and now stands 3.7% higher than last September while non-revolving credit rose at a 4.7% annual rate and is now 5.2% above year earlier levels (see chart below).
The ISM non-manufacturing index in October stood at 60.3 compared to 61.6 in September and 59.8 a year ago. Any reading above 50 suggests the non-manufacturing sector is expanding.
According to the Cromford Report, resale home listings in the Greater Phoenix area were 21,279 in October. While up from September’s 20,201 listings, that’s down 6.7% from last October’s 22,809 listings. Resales were down a modest 1.4% from year-earlier
levels in October but were up 3.5% from September. It is not surprising. The low level of inventory on the market appears to be holding back sales. The effect of low inventory can be seen by the fact that average days on market for a home is now 59.3 compared to 64.6 a year ago.
According to the Cromford Report, the median sales price of an existing home in October was up 6.5% from year earlier
levels to $262,000.
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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Scottsdale, Arizona 85251