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If the U.S. economy holds its trajectory, it will mark 10 years of growth in June

But with 2.3% average annual growth, it is also our weakest expansion of modern times

Federal Reserve officials at their May meeting held the fed funds rate steady between 2.25% and 2.5%

In May, U.S. consumer confidence rose to a six-month high, registering 134.1 on the Conference Board’s index

    You can also download a PDF file of this edition of the BRIEFING
NO-FRILLS GROWTH

If the U.S. economy holds its trajectory, it will mark 10 years of growth in June and set a record in July as the nation’s longest-running recovery. But with 2.3% average annual growth, it is also our weakest expansion of modern times, trailing well behind the 3.8% annual growth generated from April 1991 through December 2000. This plodding pace may be dampening volatility that is typical amid faster recoveries, and it is certainly keeping inflation at bay, motivating Federal Reserve officials at their May meeting to hold the fed funds rate steady between 2.25% and 2.5%.

Look for more of the same in the near term. Annualized gross domestic product (GDP) growth of 3.2% in the first quarter, April’s 263,000 net job gain and 3.6% unemployment – the lowest rate since 1969 – will buoy spending and continue to drive the economy. Average hourly earnings in April rose 3.2% YOY, outpacing the period’s 1.8% rise in consumer prices. First-quarter productivity surged 2.4% YOY, well above the 1% quarterly average of the last five years, perhaps reflecting greater integration of artificial intelligence and other advanced technologies. And in May, U.S. consumer confidence rose to a six-month high, registering 134.1 on the Conference Board’s index and topping many economists’ estimates.



Absent a meltdown in the corporate debt markets, economic growth in 2019 will likely remain positive but slower than 2018’s pace. Job creation in the first four months of this year lagged year-ago results, for example. Factory output declined for the third consecutive month in April and was down 2.1% on an annualized basis in the first quarter.

For commercial real estate, solid fundamentals and adequate debt and equity capital bode well for continued, healthy performance. Cap rates at historic lows still provide a positive spread over the 10-year Treasury rate and offer a competitive return relative to investment-grade corporate bonds. Rising land and construction costs and labor challenges continue to stave off systemic overbuilding that undermined some previous cycles.

SIGNS AND SIGNALS
  • Amazon reported a record $3.6B first-quarter profit, primarily from advertising and cloud revenues and reduced spending on fulfillment centers and logistics infrastructure.
  • Nationally, 405 million square feet of industrial product was under construction at the end of the first quarter, the highest level on record.
  • U.S. births fell to 3.79 million in 2018, a 32-year low, and have failed to show a predicted rebound with the economic recovery.
  • Southern and western markets led the nation in population growth from 2010-2018, according to new Census Bureau estimates. In the lead, the Dallas and Houston metros each gained over 1 million residents in that time.
  • Eurozone combined GDP grew by 1.5% in the first quarter, up from 0.9% in the previous quarter.
  • Marriott is launching a home-rental service. The world’s largest hotel operator has about 1.3 million guest rooms, STR Inc. reports. According to AirDNA, a market tracker, Airbnb’s room count exceeds 4.9 million.
  • The FDIC’s Problem Bank List is down to just 60 banks totaling $48.5B and there were no new bank failures in 2018.
  • Household debt increased to $13.67T in the first quarter, its 19th quarterly increase, and is nearly $1T more than the previous peak reached in third-quarter 2008, according to the New York Federal Reserve.




TRANSWESTERN

the BRIEFING
THE NATIONAL ECONOMY AT A GLANCE
JUNE 2019


DISCLAIMER
Copyright © 2019 TRANSWESTERN. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from various sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.


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