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
With all the political squabbling in Washington over infrastructure and expanding the social safety net in Biden’s Build Back Better plan, a political football has turned out to be raising the U.S. debt limit. The debt limit is the amount of money Congress allows the Treasury to borrow to keep the government running. It is like the government’s credit card. In July 2019, the debt limit was suspended for two years at $22 trillion. When it was recently reinstated on August 1, 2021, the limit reset at $28.4 trillion to match the existing level of debt. The increase over the past two years reflects the massive support authorized by Congress to help individuals and businesses to get through the global pandemic.
Since the reset of the debt limit, the Treasury Department has been using what is termed extraordinary measures to keep paying the government’s past expenses. This requires using special accounting measures to use all available resources and cash to continue to operate. Because of the way in which revenue flows to the government and when expenses are incurred, no one knows exactly when the U.S. government will run out of cash. The best guess is the end of October or beginning of November. If the debt limit is not increased, the government would delay payments for government activities, default on debt obligations, or both. The consequences could be catastrophic.
Government spending has grown rapidly over the past couple of years due to the pandemic. The gap between spending and revenue grew to more than $2.2 trillion in fiscal year 2021 compared to historical deficits of less than $1 trillion. The deficit was even higher in 2020 at $2.7 trillion.
The U.S. has never defaulted on its debt obligations and hopefully the debt limit will be raised within the month. But the contentiousness in Washington may cause this issue to go to the very end before it is resolved.
U.S. Snapshot:
- The Consumer Confidence Index declined for the third consecutive month in September and dropped to its lowest level since February. The index came in at 109.3 down 5.1% for the month and up 7.9% from a year ago. The confidence level matches expectations of a slowdown in growth in the third quarter.
- The Michigan Consumer Sentiment had a slight improvement from the mid-month level to 72.8. The respondents to the September survey continued to cite the Delta variant and inflation as the main catalysts for the decline.
- ISM’s Manufacturing PMI increased to 61.1% in September. The index is up for the second consecutive month and has been above 60% for 6 out of 9 months this year. The index has not been below the 58.7% seen in January of this year (any reading above 50% signals growth). September’s level signals strong sector expansion despite material and labor challenges.
- Personal consumption expenditures grew at 0.8% in August. The monthly increase continues to signal strength in demand from consumers. Personal income had increase of 0.2% bringing the savings rate down from 10.1% to 9.4%.
- Real GDP grew at an estimated annualized rate of 6.7% for the second quarter of 2021. This was above both the previous estimate and expectations of 6.6%.
- The NAR’s Pending home sales index rebounded to 119.5 in August. A slight increase in inventory helped moderate prices and allowed some buyers to comeback.
Arizona Snapshot:
- Sky Harbor’s 2021 passenger levels continue to outperform the levels seen in 2020. In August, enplaned passengers were up 141.5% and deplaned passengers were up 140.5% bringing the year-to-date passenger total to 24,053,479 (up 63.1% for the same time period in 2020). However, when compared to 2019, total traffic is down 7.0% from August 2019 and 22.5% on a year-to-date basis.
- S&P/Case-Shiller 20-City Composite Index continued to grow at an accelerated pace in July. The index was up 19.9% from a year ago. Greater Phoenix continues to outperform the rest of the country and leads all major metro areas in growth with an increase of 32.4% for the same time period.
- Lodging activity continues to lag the 2019 levels but is up nearly 20% from the levels seen a year ago.
