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 recovery, inflation, and COVID. Do we talk about anything else? Not this week.
New inflation data and new opinions on that inflation data are making their way into the conversation of nearly every other economic indicator. Inflation posted its largest annual gain in June since 2008 and core inflation increased to its highest annual level in nearly 30 years. But the majority of experts still point to supply chain bottlenecks and pent-up demand as the culprit, maintaining that the inflation pain is a temporary issue. However, the level of inflation last month still surpassed expectations, causing some to consider an elevated rate of inflation for longer than initially expected.
If you ask consumers about inflation, they aren’t happy about it, which caused the Consumer Sentiment Index to fall 5.5% earlier this month. However, consumers are still spending, driven by categories initially affected by the shutdowns related to the pandemic such as restaurants and clothing stores. Vaccinations and the easing of closures related to COVID-19 have helped drive the continued recovery. Thus, a slowdown in vaccinations and new COVID variants are threats to that continued recovery.
Here locally, Arizona has now recovered 86.6% of lost jobs and Greater Phoenix is nearing the finish line with 96.9% of lost jobs recovered. Retail sales across the state continued their strong pace as well, growing 0.6% for the month and up 21.3% from a year ago. And the apartment market continues to tighten. Vacancy across Maricopa County fell to 6% (from 8.5% a year ago) and rents rose 5.8% from just three months ago, totaling a 10% increase from last year. More supply is needed ASAP!
- The Blue Chip panel lowered its 2021 GDP growth forecast slightly from 6.7% to 6.6% in 2021 but increased its 2022 forecast to 4.5%. The panel remains concerned by inflation, but they do not expect the Fed to change its policy until 2023.
- Inflation accelerated in June past economists’ expectations. Consumers saw their prices increase 0.9% for the month and 5.4% from a year ago. Core inflation is up 4.5% from a year ago, the largest increase since September 1991. Producers saw a price increase of 1.0% for the month and 7.3% for the year.
- Retail shoppers increased their spending last month. June’s 0.6% increase comes as a surprise following the 1.7% decline seen in May. The growth was in categories that were initially affected by the pandemic (restaurants and clothing stores) and categories that saw growth early in the pandemic saw declines (furniture and building materials). Auto sales saw declines as the supply-chain disruptions have limited the number of vehicles available to consumers.
- Consumer sentiment declined 5.5% in the first half of the month. The issues with supply chains, jobs and inflation were the cited as the top concerns by consumers. Additionally, consumers are starting to complain about the rising costs of homes, vehicles, and household durables.
- Industrial production continues to grow despite the shortage of semiconductors. The index increased 0.4% for the month and reached 100.1. June’s level remains below the pre-pandemic level of 101.3 seen in February 2020.
- June’s employment data release was heavily affected by seasonal job losses in education due to summer recess. Government lost 34,800 jobs while the private sector gained 26,000 jobs. Looking at seasonally-adjusted data, the state and large metros gained jobs. Arizona gained 37,800 jobs, Greater Phoenix job count rose 41,600 and Greater Tucson had an increase of about 700 jobs.
- So far through the recovery, Greater Phoenix has led the way and regained 96.9% of jobs lost. Arizona has recovered 86.6% of the jobs lost and Greater Tucson recovered 64.3%.
- Year-to-date through June, Arizona and Greater Phoenix are growing at 1.3% and 1.9%, respectively. So far, for the first half of the year, Greater Tucson remains 0.1% below last year’s level.
- The apartment market in Greater Phoenix saw an increase of 5.8% on average rent in the second quarter and a drop to 6.0% for vacancy rate.
- Retail sales continue growing. Arizona rose 0.6% in May and 21.3% from a year ago. Maricopa County saw an even greater increase, with a monthly increase of 0.8% and 24.0% from a year ago.