October Economic Overview – 5 Notable Points

FedRunning out of steam? Our first note is the U.S. economic expansion continued this past summer, but only at a 1.5% increase according to a report released by the BEA last week. Down sharply from 3.9 % growth this past spring.

Our second note is that Congress did extend the debt ceiling as the month closed out. This prevents another standoff between the White House and the Congress, and gives the government an additional 80 billion dollars to play with (ooops – sorry) to be able to borrow and keep the government working. For the most part both sides of the aisle said it was a bad deal, but necessary to keep the government operating effectively.

The third note, another month where the Fed did not raise interest rates. After almost ten years, eight of which  included speculation that an interest rate rise was right on the horizon, the Fed Open Market Committee said a 0-0.25 funds rate seems appropriate. See our first note as to why they may have kicked the can again. This policy hurts the elderly, the retired, and non-profits who want to generate income with safety. Don’t be surprised if it continues through the end of the year, and then doesn’t go anywhere very fast.

Fourth note, new home sales really fell off the cliff in September dropping 11.5 percent. This could be from low inventories, or it could be traced back to the first note again. Home prices have generally been climbing about 4 percent in value over the past couple years.

Fifth note, office building construction totaled $44.9 billion for the 12 months ending in August. That is up 27.4% from one year ago.  Office vacancy is declining and rents are rising. Expect this growth to peak in late 2015 and slow as we move into 2016. Commercial Real Estate industry expects another solid year in 2016.

-- Jim West, broker
Coldwell Banker Commercial Jenkins & Associates