The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
By Elliot D. Pollack & Co. | Rose Law Group Reporter
The impacts of supply and demand imbalances continue to be on full display in each weekly release of economic data. Consumer spending on goods has been hampered, not by lack of demand, but rather bottlenecks in production and the supply chain. Demand has stayed incredibly strong due to pent-up savings, and is driving up prices, with housing at the forefront. Fortunately, with continued vaccinations, more and more of the economy has reopened and spending will shift from goods towards services. This will help drive the country toward full economic recovery and will bolster those industries hit hardest such as food services, tourism, and hospitality.
In Arizona, May’s lodging occupancy performance was 68% above a very suppressed May 2020. But last month’s occupancy level was also 91% of May 2019 occupancy. So we are certainly trending in the right direction and should see full recovery soon barring any new roadblocks.
U.S. Snapshot:
- Consumer expenditures were flat in May after 0.9% growth in April. Spending has started to shift from goods to services which is expected to continue for the rest of the year.
- Consumer sentiment declined in the second half of the month but remained the second highest monthly level since the start of the pandemic. June’s level of 85.5 was up 3.1% for the month and 9.5% for the year.
- Mortgage rates surpassed 3% for the first time in 10 weeks. Expectations remain for interest rates to continue to increase gradually.
- Existing single-family sales fell for the fifth straight month in May. The seasonally adjusted annual rate declined 1.0% to 5.08 million sales but is up 39.2% from a year ago (up 6.9% from May 2019 levels). The median sales price increased and is up 24.4% from a year ago. The lack of inventory and the increase in prices continue to hold back potential buyers, including first-time home buyers.
- New single-family home sales decline for the month. The seasonally adjusted annual rate fell 5.9% to 769,000 sales in May. As the prices of raw materials continue to push prices higher, the median sales price of a new home was $374,400 which is an 18.1% increase year over year.
Arizona Snapshot:
- As expected, hotel occupancy dropped as the summer heat started to be felt in Arizona. Lodging occupancy declined from its post-pandemic high in April to 63.9% in May but remained 67.8% above the lows of a year ago. Compared to a more normal year in 2019, hotel demand in May 2021 was at 94.4% of May 2019 demand. Due to increases in hotel supply from 2019 to 2021, May 2021 occupancy reached just 91.2% of May 2019 occupancy. Still, we are miles improved from one year ago and trending in the right direction.
