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Results, No Excuses

Arizona and National Economic Update ~ March 2014

Only minor changes are being realized in the economic data on a month-to-month, or ever a quarter-to-quarter basis. Expect home price appreciation to remain sluggish for the first half of the year or so. The very cold winter months are now turning into warmer, more productive months. This will add to economic activity and should be seen in the numbers shortly. Improvements in employment and output should help to further strengthen the recently improving consumer confidence readings.

U.S. Snapshot:

  • In March, the composite index for consumer confidence was a higher than expected 82.3, up from 78.3 a month ago. “Normal” is benched at 100. The University of Michigan index has held steady and remains at 80.0.
  • Manufacturer’s new orders for durable goods rebounded 2.2% in February, following a decrease of 1.3% in January. Over the year, durable orders slowed to 0.2% growth in February. As of February, year-to-date durable orders increased 2.2% over the same period last year.
  • New home sales in February decreased 3.3% from a month ago, and are 1.1% below the February 2013 estimate.

Arizona Snapshot:

  • For Arizona, the employment figures are picking up where 2013 ended with a 2.1% rate of growth through February. Eight of the eleven major sectors reported job gains while three sectors reported job losses (manufacturing, other services, and government). Through February, Arizona ranks 11th nationally in terms of employment growth.
  • As the charts below show, Greater Phoenix has now regained 63% of the jobs lost during the recession. The state as a whole is lagging slightly with 56% recovery.
  • The S&P/Case-Shiller Home Price index for the Phoenix market declined 0.2% over the month but was up 13.8% from a year ago.

Arizona and National Economic Update ~ November 2013

U.S. Snapshot:
The government shutdown weighed heavily on the minds of consumers as the confidence index dropped from 80.2 in September to 71.2 in October. The index now stands below levels reached a year ago.

National retail sales for September declined 0.1% from last month, but, are 3.2% above a year ago. This is a sign of weakness going into the Christmas season.

Sales of light vehicles and trucks fell a sharp 5.2% in September following a 1.9% rise in August. The drop was led by domestic trucks, down 7.5%. Domestic cars were down 5.1%. Import autos were down only 1.8%.

Consumer prices were up 0.2% in September vs. August and now stand a modest 1.2% over a year ago. This is good news and bad news. The bad news is that the modest increases are below the Fed target of 2.0% and reflect very weak domestic demand.

Growth in industrial production topped expectations in September. But, it was all about atypically cool weather. Manufacturing was still flat. Overall, industrial production was up 0.6% following a rise of 0.4% in August. The gain was primarily due to a surge in utilities as cool weather boosted utility demand.

Capacity utilization rose to 78.3% from 77.9% in September. While this is an improvement, it is still below the 80% that has historically been associated with increases in plant spending.

According to the Institute for Supply Management, manufacturing expanded in October for the fifth consecutive month and the overall economy grew for the 53rd consecutive month.

Pending home sales declined for the fourth consecutive month in September as higher mortgage interest rates and higher home prices curbed buying power. The Pending Home Sales Index, a forward looking indicator based on contract signings, fell 5.6% to 101.6 in September from a downwardly revised 107.6 in August. The index is at the lowest level since December 2012.

According to the S&P/Case-Shiller home price index, home prices continued to climb nationally. Both the 10 and 20-city indices were up 12.8% over a year ago and 1.3% in August vs. July.

Arizona Snapshot:
According to data compiled by Fletcher Wilcox and the Cromford Report, it appears the major disruptions in the Greater Phoenix home market is near an end. September foreclosure starts were below 2006 levels. Auctioned properties were the lowest since 2006. Short sales were the lowest since 2007. Virtually every indicator of disruption was down significantly.

According to CBRE, the Greater Phoenix office market continues to improve. For all three quarters of 2013 reported, absorptions significantly exceeded change in inventory. Thus, vacancy rates are down 1.7 percentage points over the last year. While vacancies are still very high by historic standards, they are moving in the right direction. The same is true in retail markets where vacancies are down 0.8 percentage points over the past year and are approaching 10%. Industrial markets are more mixed as change in inventory for the first three quarters of the year exceeded absorption by over 1 million square feet.

Condition of The Economy ~ February 2013


Total weekly unemployment insurance claims have been flat for the last several weeks. Even so, total claims are down 37.8% from a year ago compared to a decline of only 1.3% nationally. The national number is shocking. The Arizona data suggests slow growth.


The latest U.S. Blue Chip consensus forecast shows that the consensus now predicts that real (inflation adjusted) GDP will register year over year growth of 1.9% in 2013 and increase by 2.4% on a 4th quarter/4th quarter basis. This is true despite the fact the real GDP was down slightly in the 4th quarter of 2012. Growth is still expected to be mediocre in 2013. As mentioned above, U.S. initial unemployment insurance weekly claims remain high. The gains made a month ago appear to have been transitory. In fact,claims are down only 1.3% from a year ago.

Nonfarm business sector labor productivity decreased at a 2.0% annual rate during the fourth quarter of 2012. The decrease in productivity reflects increases of 0.1% in output combined with a 2.2% increase in hours worked. This is not good news. Productivity is commonly linked to standard of living. Productivity must grow for our standard of living to grow. Unit labor costs in non-farm businesses increased 4.5% in the 4th quarter of 2012. This is due to the combined effect of the 2.0% decrease in productivity and a 2.4% increase in hourly compensation. If this were to continue, it would create inflationary pressures.

The consumer continues to take on new debt at a steady and strong clip. But, whether it points to rising demand is more problematic. Consumer credit increased at an annual rate of 6.3%. But, the revolving side, which is the credit card side, to these totals isn’t always adding to the total. Revolving credit has been very flat, up a little bit one month and then down a little bit the next and is down $3.6 billion in the latest data. What is going up is non-revolving credit where vehicle sales come into play, and they have been very strong. But, this is also where student loans are tracked. And they continue to climb straight up without much monthly variation. Thus, aside from vehicles and student loans (how do you spell bubble), consumers aren’t taking on much debt, a factor that is limiting the contribution from the consumer sector.

National Economic Update

There is good news this week. First, initial claims for unemployment insurance dropped to 339,000 claims last week, and it is down from 369,000 claims the previous week. This is a marked improvement from the levels of the past several months. The number was 15.7% below a year ago and 8.1% lower than a week ago. The four-week moving average is 9.8% below a year ago and 3.1% below a week ago. At least this indicator is now moving in the right direction. The other pleasant surprise was in the University of Michigan Consumer Sentiment Index. It jumped to 83.1 (preliminary) in October. This is up from 78.3 in September and higher than the consensus expectation of 78.5. While still very low by historic standards, at least there is finally some improvement.

In other news, the consensus forecast of U.S. economic growth for 2012 and 2013 slipped a bit over the past month according to the October survey. The downward adjustment in the consensus forecast of GDP growth this year resulted from a recent downward revision in the government’s latest estimate of growth in the second quarter coupled with consensus expectations of somewhat softer than previously expected growth in the final quarter of 2012. The drop in the consensus forecast of GDP growth in 2013 likely resulted from increasing concern about the “fiscal cliff”. In any event, the forecasts were only modestly lower in both cases. Expectations, though, continue to point to a continuation of the mediocre rates of growth that we have experienced in this recovery.

As for Arizona, weekly unemployment claims now stand 34.9% below year earlier levels and are down 4.4% in September relative to August. Total claims were 73,791 in September, 2012. In Greater Phoenix, total residential listings stood at 21,703, down 19.5% from a year ago. Total homes sold for the month was 6,478, down 17.9% from a year ago. The median price of sold homes in September, 2012 was $150,000. This is up over 30% from a year ago.

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