Pollack: A recovery in process

By Elliot D. Pollack & Co. | Rose Law Group Reporter

We are a day late for our Monday Morning Quarterback. We hope that many got a chance on Memorial Day to spend time with loved ones and took some time to honor our nation’s heroes who died in service to our country.

As far as the data went last week, the second estimate of real GDP for the 1st quarter remained at 6.4% which was slightly lower than expectations but significantly higher than a normal quarter. It reflects the fact that the economy is still in the process of opening back up and recovering. This is also a great time to remember that it is much easier to shut down an economy than it is to open one back up and we are still experiencing the pain and effects from government actions over a year ago.

Personal income has been on a monthly roller coaster due to the latest round of stimulus. April showed a decline of 13.1% after a spike in March of 20.9% but, even averaging the two months together results in an increase over last year. Consumer confidence surveys are showing some mixed results. There is positivity related to the continued economic recovery and better job prospects, but pessimism related to expectations for more inflation after witnessing surges in certain spending categories like housing, autos, and other durable goods.

And finally, housing. Nationally, sales of both new and existing homes dropped in April compared to March while prices continue to march upward (and Greater Phoenix led the nation again according to the latest S&P CoreLogic Case/Shiller Home Price Index). Lack of supply is to blame for the reduction in sales. On the new home side, builders continue to struggle to plug the inventory gap due to disruptions in the supply chain causing shortages in lumber and other raw materials. For existing homes, we are anxiously awaiting the potential impacts of the end of government-mandated eviction moratoriums and loan forbearance programs this fall to see if that increases the supply of available homes for sale.

U.S. Snapshot:

  • The annualized real GDP growth rate remained at 6.4% in the second estimate for Q1, according to the Bureau of Labor Statistics. This was slightly below expectations of 6.5% but remains a positive for the U.S. economy.
  • Inflation as measured by the GDP price deflator is up 1.9% from a year ago in the first quarter. The preliminary estimates for second quarter in July bode watching.
  • Personal income declined 13.1% from a month ago as the stimulus check boost faded in April. Disposable income fell even more (14.6%), while personal consumption had a slight increase (0.5%), causing a decline in the savings rate from 27.7% to 14.9%.
  • The U.S. Consumer Confidence Index had a slight decline (0.3%) but remained near the post-pandemic high. Inflation remains a closely watched subject by consumers and contributed to declined.
  • The S&P CoreLogic Case-Shiller composite-20 index increased 2.2% in March, up 13.3% for the year. The S&P CoreLogic Case-Shiller index is created using the repeat sales method that measures properties that have sold at least twice. The price growth is not news, but the strength seen across all 20 cities was remarkable, with only the Chicago market not seeing double-digit annual growth.

Arizona Snapshot:

  • According to March’s S&P CoreLogic Case-Shiller, Greater Phoenix led the nation for the 22nd consecutive month with a 20% annual growth rate.
  • Hotel occupancy levels in April of 67.8% represent a decline from 68.8% in March. This data is also still below the normal level of 73% typically seen in April in non-pandemic years.
  • Air traffic at Sky Harbor exceeded 3.1 million total passengers in April. Despite the continued recovery, year-to-date, 2021 is still below levels reported in 2020 for the same time period and significantly below 2019 traffic levels.
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