ELLIOTT D. POLLACK
FOR IMMEDIATE RELEASE
July 29, 2019
The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
The second quarter GDP numbers were the big news this week. Economic growth of 2.1% beat expectations.
Besides that, overall the news was good. Real consumer spending rose at a rapid 4.3% rate during the quarter. Government spending also grew rapidly at 5.0%. Inventory spending by business was a drag on the economy but that’s not a bad thing. Business cut inventories so they were more in line with sales. Business spending on plant and equipment was down but it’s, overall, only a small part of the economy. Housing, a small but very volatile sector, was down as well. This sector fell for the sixth quarter in a row. Durable goods orders were mixed. There was some good news as orders for non-defense goods excluding aircraft were up. But, existing home sales were down modestly. And in a move right out of the FED’s playbook, the European Central Bank left rates unchanged but hinted at future rate cuts.
The good news, though, is that the economy continues to expand. The rate of expansion in the quarter is probably more in line with what the long term potential of the economy really is at this point. That is due mainly to demographic factors. Going forward, look for growth to continue to mildly moderate.
In Arizona, lodging performance continued to improve as did retail sales. In Greater Phoenix, the number of multifamily units under construction continued at a high level and exceeded absorption while in Southern Arizona single family permits in June were modestly up.
As discussed above, second quarter real GDP was up at a 2.1% annual rate. This was above expectations. The big push came from consumers. Given the strength in labor markets and gains in real disposable incomes, this is not surprising. The rate of growth in real GDP is likely to continue to be moderate in the second half of the year.
Advance new orders for manufactured durable goods in June were up from May by 2.0% but were 1.6% below year earlier levels. Taking out the most volatile sectors, defense and aircraft, the picture improves. By that measure, spending was up 2.0% from a year ago.
Existing home sales weakened in June. Sales were down 2.2% from a year ago.
On the other hand, new home sales were up 4.5% from year earlier levels in June to 646,000 homes.
Statewide lodging performance improved in the second quarter of 2019. Occupancy increased to 69.9% compared to a year earlier level of 68.7%. Demand was up 2.2% from year-earlier levels and supply was up 0.4%.
Lodging performance in Greater Phoenix also improved. Occupancy was 69.9% compared to a year earlier level of 69.0%. Demand was up 1.9% and supply was up 0.6%.
In Greater Tucson, occupancy was 65.1% compared to 64.0% a year ago. Demand grew by 1.0% and supply was down 0.6%.
According to ABI Multifamily, there were 14,442 units under construction in Greater Phoenix at the end of the second quarter. A year ago, there were 16,766 units under construction and at the end of the first quarter, there were 13,894 units under construction. Also, at the end of the second quarter, there were 18,992 units in the planning stage compared to 21,672 at the end of the first quarter and 16,761 a year ago.
Greater Tucson issued 351 new home permits in June. That’s 1.2% above a year ago.
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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