A hazy picture of the U.S. economy has emerged from the most recent snapshots of retail sales, housing, manufacturing, the job market and the confidence of consumers.
The figures reflect higher borrowing costs, slower hiring and rising uncertainty just before much of the government shut down Oct. 1 – all trends that the Federal Reserve is trying to assess at a policy meeting this week.
Taken together, they portray an economy that was stumbling even before the shutdown, which further slowed growth.
Still, many Americans have managed to keep up their purchases in recent weeks. Their spending has raised hopes that if Congress can reach a long-term budget agreement in coming months, economic growth will pick up.
“One of the things that’s really holding back the economy is this fog of uncertainty,” said Mark Vitner, an economist at Wells Fargo.
One major factor behind the uncertainty: Congress and the White House agreed on Oct. 16 to reopen the government – but only until Jan. 15, when a new deal must be reached. That raises the threat of another shutdown.
Nor is it clear when the Fed will begin to pull back on its stimulus for the economy. And the sloppy rollout of the Obama administration’s health care program has added to the reluctance of many small businesses to hire, Vitner said.
All this has made the Fed’s task of evaluating the economy even harder than usual. The Fed is considering when to slow its $85 billion in monthly bond purchases. Those purchases are intended to keep borrowing rates low to spur growth. Chairman Ben Bernanke has noted that the Fed’s policy decisions are “data dependent.”
Yet most of the economic data that will be released in coming weeks will be distorted by the government shutdown. For example, the October jobs report, due Nov. 8, may show a rise in the unemployment rate only because of the temporary layoff of government workers and contractors.
“This is a very difficult time for the Fed,” Vitner says. “The data is not all that clear, and there are a lot of structural shifts in the economy.”
Those shifts include an aging workforce, which means more older workers are retiring and dropping out of the work force. Their exodus has artificially lowered the unemployment rate, making that key gauge of the economy less reliable. People who are out of work but have stopped looking for a job aren’t counted as unemployed.
The most recent reports the Fed will consider have pointed to a weak economy, though there are a few bright spots:
- Consumer confidence fell to a six month low in October, according to the private Conference Board. The partial shutdown made Americans more pessimistic about future growth and hiring. Lynn Franco, director of economic indicators at the board, said the “temporary nature” of the budget agreement means that confidence could fluctuate in coming months.
- Retail sales rose modestly in September outside of auto sales, the Commerce Department said. Auto sales dropped 2.2 percent, the most in almost a year. But that was mostly because of a calendar quirk that shifted Labor Day weekend sales to August. Sales rose in most other areas, including restaurants, electronic and appliance stores, and sporting goods stories, a sign Americans were willing to spend on items that weren’t essential.
- Higher interest rates and rising home prices discouraged many Americans from buying existing homes in September. A measure of signed contracts reached its lowest level in nine months. The National Association of Realtors’ index of pending home sales fell below the level it had reached a year earlier.
- Orders for most long-lasting U.S. factory goods dropped last month as businesses cut back on spending. The decline suggested that businesses weren’t confident about the economy. And U.S. factories only slightly boosted their output in September, mostly because auto production rose.
- Hiring has slowed. Employers added an average of just 143,000 jobs a month from July through September. That was down from an average of 182,000 in April through June and from 207,000 in the first three months of the year. The unemployment rate dipped to a still-high 7.2 percent in September from 7.3 percent in August.
David Berson, chief economist at Nationwide Financial, noted that rising mortgage rates typically coincide with a strengthening economy and increased hiring. Normally, those additional jobs help offset the dampening effect of higher mortgage rates.
The average rate on a 30-year mortgage rose to a two-year high of 4.58 percent in August and remained near that level in September. It has since fallen back to 4.13 percent.
“But not this time,” Berson said. “This time we only had the rise in mortgage rates. We haven’t gotten the jobs.”
Copyright © 2013 The Associated Press
Florida’s consumer confidence fell sharply in October to 71, a seven-point drop compared to September and its lowest level in nearly two years, according to a new University of Florida (UF) survey.
“This is the lowest reading since December 2011 following the last debt ceiling showdown in August of that same year,” says Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research.
“Confidence among Floridians was already declining prior to any indication of a shutdown and debt ceiling debate,” McCarty adds. “However, there is no doubt that confidence in September took a hit as we replayed the events of August 2011 – the last time the U.S. was precariously close to a default. Much like the rest of the country, Floridians were not happy with the prospect of defaulting on our national debt and a prolonged shutdown of federal services.”
All five components used in the UF index decreased. Respondents’ overall consensus over whether they are personally better off financially now than a year ago fell three points to 62. Their expectations of improved personal finances a year from now was 74 – a decline of six points from September.
The survey-takers’ confidence in the U.S. economy over the coming year dropped eight points to 68, and their outlook for the nation’s economic health over the next five years sank two points to 73. Both components are at their lowest level since December 2011.
Meanwhile, their view that the present is a good time to buy a big-ticket item, such as a vehicle, fell 11 points to 80.
“Respondents age 60 and over registered a 12-point drop in expectations of U.S. economic conditions over the next year, and a 20-point drop in perceptions as to whether it is a good time to buy big-ticket items,” McCarty says. Seniors were the survey’s most pessimistic respondents, possibly because a federal government default would delay Social Security checks and negatively affect the stock market, hurting retirement accounts.
“As the holiday season is upon us, we estimate weaker-than-usual sales as the Florida consumer remains pessimistic, particularly since new debates among lawmakers are due in January,” McCarty says. “The effect of this could be reversed if lawmakers signal agreement on the postponed debt-ceiling debate sooner.”
Conducted Oct. 1-24, the UF study reflects the responses of 411 individuals, representing a demographic cross-section of Florida. The index used by UF researchers is benchmarked to 1966, which means a value of 100 represents the same level of confidence for that year. The lowest index possible is a 2; the highest is 150.
© 2013 Florida Realtors®
The U.S. Small Business Administration (SBA) has scheduled two webinars intended to help small business owners understand the law and the new rules that impact them under the Affordable Care Act.
The online meetings take place on Oct. 24 and Oct. 31 at 2 p.m.
Discussion topics include:
- Small business tax credits (available to businesses and tax-exempt non-profits) – who’s eligible for them and how to claim them
- Marketplace updates
- Shared responsibility
- Cost containment
- Tools and resources available for small businesses interested in learning more about the law
A question and answer period will follow. To sign up, click on one of the links below:
• Oct. 24 at 2 p.m.
• Oct. 31 at 2 p.m.
© 2013 Florida Realtors®
The Fall 2013 American Express OPEN Small Business Monitor research suggests that business owners have abandoned their “wait and see” approach, with a third (32%) of entrepreneurs making growth a top priority.
More small business owners are making capital investments (54%, up from 49%) and hiring plans are up (35%, up from 29%) year-over-year. Entrepreneurs are also in a stronger position to increase investments as cash flow becomes less worrisome (52% reported a cash flow crunch, down from 59% six months ago).
Attitudes about the U.S. economy have also changed, with less worry potentially leading to more investment.
The survey found that fewer business owners believe the economy is in recession (25%, down from 36% last fall). When asked about their six-month outlook, more than half (56%) have a positive expectation about business prospects and more than four-in-ten (43%) believe their revenues will increase. Currently, nearly four-in-ten (38%, up from 27%) say revenues are greater than a year ago, and 16% say they have more employees than they did last year, compared to 8% in fall 2012.
“Small business owners appear poised to flip the switch to growth mode,” said Susan Sobbott, president, American Express OPEN. “Business owners are getting more targeted in their approach to building customer demand and an increasing number are using analytics to better understand their customers and social media to drive sales.”
Apartment vacancies fell by 10 basis points in the third quarter to 4.2 percent, according to a preliminary look of the ReisReports third-quarter market report for the apartment, office, and retail sectors. Asking rents increased by 0.9 percent in the third quarter. But the high demand won't automatically mean rent increases.
“Despite the persistent strength of the apartment market recovery, rent growth is being held in check by a still-weak recovery in the economy and the labor market,” according to ReisReports. “Too few jobs, many of dubious quality, and too little income growth are constraining landlords’ ability to raise rents.”
The office sector also posted declines in vacancies, falling by 10 basis points in the third quarter to 16.9 percent. The struggle in the labor market continues to constrain demand for office space, the report notes.
Meanwhile, Reis data backed up recent media reports of a sluggish recovery in the retail sector. Vacancies for neighborhood and community shopping centers were at 10.5 percent in the third quarter, falling 30 basis points year-over-year.
“Neighborhood and community center rents lost a lot of ground given the severity of the recession and the sluggish recovery,” the report notes.
Some submarkets in retail are showing signs of growth, but they tend to be insulated in wealthy neighborhoods. Other neighborhoods are still facing empty, older spaces from businesses that closed or moved elsewhere.
In general, malls are posting a stronger recovery than shopping centers. National vacancies in shopping malls are falling at a faster pace than neighborhood and community shopping centers, Reis reports. Mall vacancies stood at 8.2 percent in the third quarter, dropping 10 basis points from the second quarter.
ReisReports will officially publish its quarterly market report for the third quarter Nov. 1.
Source: Reis
There are many ways to measure a company’s return on investment in social media. Effective methods often depend on how small-business owners are using social media and for what purpose.
The “amplification model,” also known as the purchase equivalency calculator, is used to measure the value of social impressions, which is how many people have seen the content, and actions, such as clicking on a link or sharing information, said Jim Tobin, founder and president of Ignite Social Media, a social media marketing agency in Cary.
The amplification model doesn’t calculate return on sales from marketing. It shows the value of impressions and actions and compares them to the cost of buying that level of activity through traditional advertising means, Tobin said.
Using the amplification model, look at your number of organic impressions on Facebook, Twitter or blog post. Facebook Insights is one of several tools that can track views and interactions.
“We can calculate the number of impressions that our organic efforts, such as our updates, have generated,” Tobin said. “And we can put a value on them by multiplying by the common cost per thousand impressions.”
For a highly targeted online media buy, such as one on Facebook and Twitter, impressions easily cost $10 per 1,000, Tobin said.
Owners can also measure actions that are more valuable than impressions, such as if someone reacts to a post, shares it or actually clicks on a link.
“So we could begin to say ‘What’s a click worth?’” Tobin said. Owners can determine that by looking at what marketers pay on the cost-per-click model, which can vary.
If a company knows it spends an average of 50 cents per click for a website, such as Google, or 20 cents per view from YouTube advertising, then look at social media analytics and figure out how much the social media clicks are worth.
“So by doing all this, you can begin to add up the value of the exposure you are generating if you were to buy it,” Tobin said.
Copyright © 2013 The News & Observer (Raleigh, N.C.) Distributed by MCT Information Services.
Many U.S. banks are starting to see new growth in commercial property loans, according to research from SNL Financial, which estimated $991.2 billion in total volume as of June 30. The tally is 3.3 percent higher than at the same time last year.
"More banks are now on the offense — not on defense anymore — when it comes to commercial real estate," said Raymond James Financial Inc. banking analyst Anthony Polini.
Lending for apartment buildings, offices, retail centers, and industrial properties took a hit when the economy soured but is starting to pick up again now that real estate values are on the rise and credit quality is improving.
Source: "Commercial-Property Lending Begins to Ramp Up," The Wall Street Journal (Oct. 15, 2013)
