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Pollack: An economic cushion



& Company


July 15, 2019

The Monday Morning Quarterback 

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

The most important news this week had to do with the FED.   Chairman Jerome Powell signaled that the central bank is ready to cut interest rates (the FED funds rate) by 25 basis points at its next meeting on July 30-31. This cut would act as a cushion for the U.S. economy against the risks of slower global growth and trade policy uncertainty. The Chairman downplayed the strong June jobs report and what appears to be a trade truce between the U.S. and China. He is instead focusing on the weakness in inflation. Year over year, the core rate of inflation in the U.S. is running below the level desired by the Fed. Indeed, Powell stated that “the relationship between unemployment and inflation became weak” around 20 years ago. And “it’s becoming weaker and weaker…” This, he believes, also strengthens the case for a modestly more accommodative policy. Obviously, the stock market liked the new stance.

In other economic news, general expectations for real GDP growth this year and next remain unchanged. The number of job openings changed only modestly and is still near record levels. Consumer credit growth, especially revolving credit, is growing well above the rate of income growth. And consumer prices, as stated above, remain lower than expectations.

In Arizona, permits for new single family housing are up very modestly from last year in Greater Phoenix and total home listings in Greater Tucson continue to decline more than total sales. Housing prices in Tucson on a year over year basis continue to be up significantly.

U.S. Snapshot:

The Blue Chip forecast of real GDP for 2019 remained 2.5% in the July forecast. This is the same as the June forecast. As for 2020, the panel projects that the expansion will continue at least through the end of 2020, the current forecast horizon.

The number of job openings was little changed on the last business day of May compared to end-of-month April levels.  The number is still 7.3 million unfilled jobs.  This remains near record levels.

Consumer credit increased at a 5.0% annual rate in May and is up 5.2% from year-earlier levels.  Revolving credit, mainly credit card debt, grew at an 8.2% annual rate in May and is now 4.5% above a year ago. Non-revolving debt, mainly auto and student loan debt, grew at a 3.9% annual rate in May and is now up 5.4% from a year ago.

Consumer prices remain lower than expectations and lower than the FED target of 2.0%.  In June, the consumer price index for all urban consumers increased 1.7% over year-earlier levels.  All items less food and energy, the core rate of inflation, stood 2.1% over a year ago.

Arizona Snapshot:

According to the Home Builders of Association of Central Arizona (Greater Phoenix), new home permits in June were up 4.5% from a year ago at 2,192 compared to 2,098 a year ago.  Year-to-date (6 months) there have been 12,018 new home permits compared to 11,808 for the same 2018 period.  That’s an increase of 1.8% for the first six months of 2019.  Thus, the new home market is slowly but steadily improving.  It is a contest between low-interest rates, strong demographics and affordability.

The resale home market in Greater Tucson continues to improve.  Total sales were 1,510 in June compared to 1,593 a year ago.  So, while sales are still relatively strong, total listings are shrinking.  This supply/demand situation explains the rapid price increases that have occurred.  It is not a sustainable rate of increase.  It simply continues to push new home prices up and makes affordability a continuing issue.

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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