A quick analysis of important economic data released over the past week
Elliott D. Pollack & Co.
The increase in inventories relative to sales we have seen over the past few quarters has finally caught up with the economy. Because of this and the slowdown in imports due to the strong dollar, GDP weakened significantly in the third quarter. While real GDP was still up (1.5%), it can only be characterized as a weak showing. In addition, consumers continue to be cautious. Personal income personal consumption expenditures were both weak. Personal savings increased.
The good news is that confidence remains high. Hopefully, this is just the needed inventory correction and resultant weak investment in plant and equipment. But, it is another indicator that the sub-par expansion is likely to continue to be sub-par.
Arizona Snapshot
The homeownership rate in the state continued to fall in the third quarter. The rate is now 60.5% compared to 63.2% a year ago and 62.8% in the second quarter of 2015.
In Greater Phoenix, the homeownership rate seems to be stabilizing. The rate was 60.5% in the third quarter compared to 60.9% a year ago and in the second quarter of 2015.
Rental vacancy rates continue to decline in the state. In the third quarter, rental vacancies were 8.1% compared to 10.1% a year ago.
According to the Case-Shiller home price index, home prices in Greater Phoenix were up 4.9% for the year ended August. The index was up 0.6% compared to July.
U.S. Snapshot
Real GDP (the value of the goods and services produced by the nation’s economy adjusted for price changes) increased at an annual rate of 1.5% in the third quarter of 2015. This is an “advanced” estimate and will be subject to revision. This increase followed the 3.9% gain in the second quarter (see chart below). Keep in mind that the second quarter was strong because of a catch up due to the weather induced slowdown in the first quarter of this year. The major problem was the slowdown in inventory investment. But, there was a deceleration in exports, nonresidential fixed investment, personal consumption expenditures, state and local government spending and residential fixed investment.
Personal income grew by only 0.1% in September after a 0.4% gain in August. Personal consumption expenditures were also up only 0.1% after a strong gain in August.
The personal savings rate increased to 4.8% in September. This is up from 4.7% in August and 4.6% a year ago. Consumers continue to be cautious.
The Conference Board index of consumer confidence fell to 97.6 in October from 102.6 in September. The index returned to normalcy after hitting a seven-month high in September. At the same time, the University of Michigan consumer sentiment reading for October was 90.0. This is down from the 92.1 at mid-month indicating that the last two weeks were roughly 88. This compares to September’s 87.2.
The factory sector showed some cracks with new orders of manufactured goods contracting slightly more than expected. They were down 1.2% in September after contractions of 3.0% in August.
The homeownership rate in the U.S. continued to decline in the third quarter. The rate now stands at 63.7% compared to 64.4% a year ago.
New single-family homes sales in September were 468,000. This is down from August but still up 2.0% from a year ago. Still, it was a weak showing.
According to the S&P/Case-Shiller 20-City Composite home price index, home prices were up 5.1% from a year ago in August and were up 0.4% for the month.
