FOR IMMEDIATE RELEASE
August 17th, 2015
The Monday Morning Quarterback /A quick analysis of important economic data released over the past week
Despite all the media hype, virtually everything that has happened lately mitigates the need for a rate hike in the short term. And if one were to occur, it would probably be minimal.
China’s currency devaluation will slow growth here modestly. While employment continues to grow at acceptable rates, there seems to be only modest wage pressure. This suggests there is still slack in labor markets that will feel modestly more so due to the above mentioned devaluation. It also appears that consumers are saving at least part of the gas price decline windfall rather than spending it all. And, as discussed later in this MMQ, inventories/sales ratios are higher than they should be.
Overall, the outlook remains about the same. But, the press will have to find something else to talk about other than rate hikes.
U.S. Snapshot:
Jobless claims continue to hold at historically low levels of 274,000 in the August 8th week. Indeed, the unemployment side of the labor market is very healthy and, if looked at in a vacuum, would justify a rate hike. As discussed above, other factors might change that in the near term.
Productivity increased 1.3% (annualized) in the second quarter after a first quarter decline of 1.1% (annualized). It now stands up a modest 0.3% over a year ago. While unit labor costs are up 2.1% over a year ago, they were up only 0.5% (annualized) in the second quarter.
A 10.6% surge in motor vehicle production gave a significant lift to industrial production which rose 0.6% (7.2% annualized rate) in July. Industrial production now stands 1.3% higher than a year ago.
Inventories rose relative to sales in June, but, the news isn’t as bad as it initially appears given that the increase was centered in autos. Business inventories rose 0.8% in June which was well ahead of a 0.2% rise in sales. This mismatch lifts the inventory to sales ratio to 1.37 from 1.36 last month and 1.30 a year ago (see chart below). This needs watching.
Arizona Snapshot:
Total unemployment insurance claims in the state now stand 11.3% below a year ago. This is a healthy sign.
The outlook for tourism in Greater Phoenix continues to be positive. For example, enplanements at Sky Harbor in June were up 4.7% from a year ago and deplanements were up 4.5%.
The median sales price of a home in Greater Phoenix according to the National Association of Realtors was $217,900 in the second quarter. In Tucson, the median price was $183,200.
According to NAHB/Wells Fargo, the housing opportunity index in Greater Phoenix was 61.8 in the second quarter. This compares to 70.2 in the first quarter and 66.4 a year ago. This indicates that affordability is down from both a year ago and from last quarter.
