The Monday Morning Quarterback: A quick analysis of important economic data released over the past week
By Elliott D. Pollack & Co.
U.S. Snapshot:
More bad news than expected, though results were mixed. Real GDP – down. Initial unemployment claims – up. Unemployment – up. Consumer confidence – one up and one down. Rental vacancy rates – up. On the other hand, employment was up, albeit modestly. Disposable personal income – up, although it is likely to be down when January data is reported as a result of increased social security taxes and higher income taxes on the “rich”. Manufacturing – stronger. Housing prices – up. Overall, the surprises were on the negative side. Most related to “your tax dollars at work”… or not. And emphasize the need to phase in higher taxes and reductions in the bloated federal budget.
Arizona Snapshot:
In a week of bad national data there were little Arizona data. That data were favorable. Total weekly claims for unemployment insurance in Arizona got back on track. Total claims declined. This seems to indicate that last week’s increase was just an aberration. That’s good news.
Arizona
Arizona weekly total weekly unemployment insurance claims dropped by 3.3% from a week ago and are down 41.2% from a year ago. This compares to a drop of only 3.4% for initial claims nationally.
National
A disappointing week. The advanced estimate for 4th quarter GDP-the output of goods and services produced by labor and property located in the U. S.-declined at an annual rate of 0.1% (fourth quarter vs. third quarter). The fourth quarter GDP number was shockingly low following the third quarter gain of 3.1%. The fourth quarter number fell short of the consensus forecast of 1.0%. It was the first GDP decline since 2009. The slowing in growth was largely due to a sharp slowing in inventory investment and a drop in government spending. Government spending as a whole declined 6.6% in the fourth quarter after rising 3.9% in the prior quarter. Defense spending fell 22%, the biggest drop since 1972. By contrast, defense spending was up 12.9% in Q3. Cynics find the notion of a sharp reversal in government spending immediately after a Presidential election suspicious. This is likely not going to be repeated in Q1 of 2013. However, it does show how significant the sequestration (automatic spending cuts) could be if the next round of negotiations on the fiscal cliff fail to bear fruit.
There were mixed results on the consumer confidence front. While the University of Michigan Consumer Sentiment index for January increased to 73.8 compared to 72.9 in December, the index was down from 75.0 in January 2012. Yet, the Conference Board Consumer Confidence Index for January declined from 66.7 in December to 58.6 in January. The index is now 4.7% below a year ago. This is the lowest level since the debt limit fiasco of November 2011. The lack of leadership in Washington is clearly taking its toll on the public’s psyche.
The latest data on initial unemployment insurance weekly claims was also disturbing. The latest data wiped out the favorable reports of the previous two weeks. Also, the national unemployment rate increased to 7.9% in January. The good news is that 157,000 jobs were added in January. That is a reasonable number given the GDP results. The good news is that November and December employment were revised upward. November employment was revised from 161,000 to 247,000. December was revised from 155,000 to 196,000 jobs. These are significant and bring employment to levels that are what should be almost normal for this point in the cycle.
Disposable personal income in December was up 2.7% for the month and is up 7.0% from a year ago. DPI is likely to have a more difficult comparison in January because of the increase in social security taxes and higher income taxes on high-income individuals. The personal savings rate also increased in December to 6.5% compared to 3.4% a year ago and 4.1% in November. Consumers continue to get their financial houses in order.
The Institute for Supply Management manufacturing index increased to 53.1 in January compared to 50.2 in December and 53.7 a year ago. A reading of above 50 indicates the manufacturing sector is expanding. In addition, manufacturers’ new orders, while up from November, were about flat from a year ago. Nondefense goods excluding aircraft were down 3.3% from a year ago.
According to the S & P/Case-Shiller home price index, national housing prices were up 5.0% over the last year. For Phoenix, the index increased 22.6% over that time period. Construction spending continued to grow and now stands 7.8% above a year ago as of December. Private construction was up 15.0% while public construction was down 5.6%.
