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Pollack: ‘Overall, it was not a bad week’
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The Source for Information and Analysis on the Arizona Economy and Real Estate
EDP LogoELLIOTT D. POLLACK

& Company

FOR IMMEDIATE RELEASE
December 12th, 2016
 
The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
More good news this week.

Economists who participate in the Blue Chip national forecast expect real GDP to expand at a higher rate in 2016 and 2017.  Productivity, after three quarters of decline, expanded again in the 3rd quarter.  Non-manufacturing continues to grow as does manufacturers’ new orders.  Consumer credit returned to the familiar pattern of growing rapidly in auto and student loan debt but modestly in credit card debt.  And consumer confidence seems to have received a “Trump bounce”.   In addition, the number of homes with negative equity continues to decline nationally and in Arizona.

Overall, it was not a bad week. It’s a continuation of what one would expect in the later stages of a recovery, just at a slower rate.  That should change for the better next year.
U.S. Snapshot:
  • The Blue Chip consensus forecast indicates that real GDP should grow by 1.6% in 2016 and 2.3% in 2017.  The unexpected election of Donald Trump coupled with more upbeat economic data as of late appears to have fostered somewhat greater optimism among many of the panelists.
  • Nonfarm business sector labor productivity increased at a 3.1% annual rate during the 3rd quarter.  This was the first increase after three consecutive declines in the measure.  Productivity is now unchanged from a year ago.
  • The ISM nonmanufacturing index in November stood at 57.2. This is up from 54.8 in October and 56.6 a year ago.  An index of 50 or above indicates the sector is growing.
  • Manufacturers’ new orders were up 2.7% in October and now stand 1.3% above ayear ago.  Inventories declined 1.4% from a year ago.  This is good news as the inventories to sales ratio has been higher than normal.  The latest data brings it closer to normal.
  • Consumer credit grew at a 5.2% annual rate in October.  Revolving credit, mainly credit card debt, was up a modest 0.2% (a 2.9% annual rate) for the month and now stands 6.0% above a year ago.  Non-revolving credit, mainly auto and student loan debt, increased 0.5% (a 6.0% annual rate) for the month and was also up 6.1% from a year ago.
  • The University of Michigan consumer sentiment index rose from 93.8 in November to 98.0 in December.  This compares to 92.6 a year ago.  This was a post-election survey.
  • CoreLogic reported that the percent of homes with negative equity continued to decline in the 3rd quarter.  Negative equity stood at 6.3% of homes compared to 7.1% in the 2nd quarter and 8.4% a year ago.  This 3rd quarter number indicates that 3.2 million homes with a mortgage are under water.  Additionally, an additional 0.8 million homes have less than 5% equity.  In total, 14.6% of homes with a mortgage have less than 20% equity.
Arizona Snapshot:
  • Arizona real GDP increased at a 2.7% annual rate in the 2nd quarter and stood 1.8%above the 2nd quarter of 2015.
  • Negative equity in the state dropped to 10.6% in the 3rd quarter compared to 14.6%a year earlier.  20.4% of homes with a mortgage are underequitied as of the 3rd quarter.
  • Total residential listings in the Greater Phoenix area were 25,511 in November.  This is up from 25,032 in October and 25,359 a year ago.
  • Total listings in Greater Tucson were 4,067 in November.  This compared to 4,103 in October and 5,096 a year ago.
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