The Blue Chip consensus forecast remains basically unchanged. Real GDP is estimated to increase at a 1.7% annual rate in the fourth quarter of 2012. After an estimated real GDP gain of 2.2% in 2012, the panel expects a 2.0% gain in 2013. That assumes the fiscal cliff is resolved. In the absence of a resolution, the Congressional Budget Office expects real GDP in 2013 to decline and unemployment to increase. U.S. initial claims for unemployment insurance remain about where they have been for quite some time. This is surprising for this point in the cycle and is another indicator of the lackluster performance the economy continues to deliver.
On the positive side, the University of Michigan consumer sentiment index rose again in November to 84.9. This is up from 82.6 in October and 64.1 a year ago. The domestic consumer is the ultimate engine of the U.S. economy and this report points to a rising contribution from consumer spending. In that regard, U.S. consumer credit increased in September at a 5% annual rate. With revolving credit declining at a 1.5% annual rate while non-revolving credit, such as auto loans, increased at a 6.5% annual rate. Thus, consumers are borrowing again for durable goods.
The Institute for Supply Management’s index of non-manufacturing activity grew in October to 54.2. A reading of 50 or more indicates expansion in that sector. October was the 34th month of continuous growth.
According to the National Association of Realtors, growth in metropolitan area median home prices increased in the third quarter. According to NAR, 120 out of 149 metro areas had growth in prices in the third quarter. This is up 7.6% from a year ago. Greater Phoenix had an increase of 34.9% and Tucson was up 15.5%. This will allow more homeowners to escape from being underwater (more debt than value). ASU’s monthly report on the Greater Phoenix housing market shows that new home prices were actually down 3.5% over the past year (as of September). Median prices of normal resales were up 8.2%. Distressed properties had the largest gains. For example, bank owned sales prices were up 45.0% over the past year.
Arizona retail sales for September were up 2.6%% from a year ago. While not great, it is at least moving in the right direction. Motor vehicle dealer sales were up 21.5% from a year ago. Retail sales in Maricopa County were up 3.1% for the same period.
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