“Don’t lie about it. You made a mistake. Admit it and move on. Just don’t do it again. Ever”
February 10, 2016.
U.S. Overview International Overview
The Economic Divide Continues to Widen The growing economic divide between domestic demand and global economic influences was the central feature of our annual economic outlook and has figured prominently during the first few weeks of 2016. Growing concerns about slowing global economic conditions have caused businesses, policymakers and investors to become more risk averse. Sales and earnings expectations have been lowered, credit spreads between government and corporate bonds have increased and the S&P 500 has tumbled more than 9 percent since the start of the year. We have slightly lowered our forecast for U.S. economic growth and now look for real GDP to rise at just a 1.8 percent pace this year and a 2.3 percent pace in 2017. The drivers of growth remain the same. Domestic demand is holding up relatively well, with consumer spending and homebuilding growing solidly. Government spending should also make a modest contribution to growth this year. Areas tied to the global economy are weakening even more, however, particularly investment tied to energy and mining. In addition, the widening trade deficit is expected to subtract 0.5 percentage points from growth this year. While expectations for economic growth have been reduced, we continue to look for the Federal Reserve to attempt to normalize short-term interest rates. Falling interest rates overseas will make this a difficult mission for the Fed, however, and the rate outlook will continue to be influenced by global forces beyond the Fed’s direct control.
International Overview
Slow Global Growth to Continue Much of the volatility in financial markets since the beginning of the year has been linked to concerns about the global economic outlook. We expect the global economy grew roughly 3 percent in 2015, marking the fourth consecutive year in which global GDP growth has been below its long-run average of 3.5 percent per annum. In our view, the outlook for global growth in 2016 is for continued weakness. With the notable exception of Brazil and Russia, real GDP growth rates in many developing economies have slowed but they generally have not turned negative. The Indian economy is growing in excess of 7 percent, and we look for real GDP in China to grow roughly 6 percent per annum in 2016 and 2017. Slow economic growth in the developing world does not help growth prospects in the developed world, but it is not likely, by itself, to lead to recession in advanced economies. The expansions that have been in place in most advanced economies should remain in place, although the pace of GDP growth in these major economies likely will be lackluster. The combination of slow growth in real GDP and lack of pricing power means that nominal GDP growth on a global basis continues to slow, and it likely will remain lackluster for the foreseeable future. Consequently, the operating environment for many businesses probably will remain challenging. Furthermore, in an environment of slow growth in nominal GDP, sovereign bond yields in most economies are not likely to rise significantly anytime soon.
A Rough Start to 2016 The central theme highlighted in our 2016 annual outlook—the widening divide between domestic demand and global economic conditions—has clearly played a prominent role during the first few weeks of 2016. Growing concerns about slowing global economic growth and its impact on commodity prices, exchange rates and corporate earnings has led to widening in credit spreads and a slide in equity markets around the world. Yields on government bonds have also plummeted, particularly overseas, where interest rates on the bonds of many developed countries are now negative. The deterioration in financial conditions is a warning sign for the economy and is typically a harbinger of slower economic growth. The growing risk aversion evident from falling share prices and declining “risk-free” government bond yields is also evident at the corporate level, where a growing number of businesses are redoubling cost control efforts and scaling back plans for capital spending and hiring. So far, consumer spending appears to be less affected, but the longer share prices tumble the greater the risk that some sort of negative wealth effect will take hold. While the markets appear to be full of gloom and doom, domestic economic conditions are holding up relatively well. Consumer spending grew at a respectable 2.2 percent pace during the fourth quarter of last year and is expected to rise 2.7 percent in 2016. Consumer spending is being supported by strong job growth, increasing hours worked and rising wages. Nonfarm employment growth has been solid, averaging 215,000 jobs per month over the past six months. The index of hours worked has also ramped up, climbing at a 2.8 percent annualized pace in the fourth quarter. In addition, average hourly earnings have gradually perked up and are now up 2.5 percent over the past year. Homebuilding is another bright spot in the economic outlook. Housing starts rose 10.8 percent in 2015 and are expected to rise 8.0 percent in 2016. While the percentage gain seems large in an economy expected to grow just 1.8 percent, the gain comes off of an extremely low base. We are looking for housing starts to rise to just a 1.20 million-unit pace in 2016, a pace well below what we would expect for an economy six-plus years into an expansion. We are looking for residential construction spending to rise a strong 8.5 percent, reflecting a larger gain in single-family starts relative to apartments. Home improvement spending is also ramping up, benefitting from rising home values and the reduced turnover of existing homes. One of the big questions for 2016 is whether the growth in domestic demand will be enough to help pull along limping global economies. The dollar has strengthened against most major currencies and has soared against currencies of emerging economies and large commodity-driven economies, such as Canada. We are looking for the trade deficit to widen as imports increase and exports decline. Another key question for 2016 is how much of a cutback we see in the energy sector. We expect oil prices to finally find a bottom at some point in 2016, but prices are likely to remain lower for even longer than had been expected and the industry is likely to undergo a major consolidation, particularly among smaller and mid-sized exploration and production firms. Capital spending budgets have also been slashed further, which is evident in our reduced forecast for structures investment. With global economic growth slowing and commodity prices under pressure, the risks to the inflation outlook will remain skewed to the downside. We still see the major inflation measures moving toward the Fed’s 2.0 percent target, however, which will keep the Fed’s goal of normalizing rates in place. We have not changed our forecast for the federal fund rate because we already had the Fed waiting until June to make its next move. We continue to have three quarter-point rate hikes in our forecast for 2016 but that view is contingent on the global economy finding its footing, or at least enough footing, so that is does not pull the U.S. economy down with it.
SEE IT ALL:
Economics Group MONTHLY OUTLOOK
FROM ME:
Phoenix Commercial Real Estate and Investment Real Estate: investors and Owner / Users need to really know the market today before making a move in Commercial Properties or Investment Properties in Phoenix / Tucson / Arizona, as the market has a lot of moving parts today. What is going on socio-economically, what is going on demographically, what is going on with location, with competing businesses, with public policy in general — all of these things affect the quality of selling or purchasing your Commercial Properties, Commercial Investment Properties and Commercial and large tracts of Residential Land in Phoenix / Tucson / Arizona. Therefore, you need a broker, a CCIM (Certified Commercial Investment Member) who is a recognized expert in the commercial and investment real estate industry and who understands Commercial Properties and Investment Properties.
I am marketing my listings on Costar, Loop-net CCIM, Kasten Long Commercial Group. I also sold hundreds millions of dollars’ worth of Investment Properties / Owner User Properties in Retail, Office Industrial, Multi-family and Land in Arizona and therefore I am working with brokers, Investors and Developers. I am also a CCIM and through this origination ( www.ccim.com ) I have access to marketing not only in the United States, but also international. Click here to find out what is a CCIM: https://en.wikipedia.org/wiki/CCIM
1
http://walter-unger.com/?p=15472
2
Click here to find Reasons to Consider me for Commercial Referrals
http://walter-unger.com/?p=15010
3
Click here to View My Listings and Profile
http://www.loopnet.com/profile/14101172900/Walter-Unger-CCIM/Listings/
4
Click here to find out what is a CCIM:
https://en.wikipedia.org/wiki/CCIM
5
Click here to view my website:
6
Interactive Map Of All 10+ Unit Apartment Listings in Metro Phoenix
http://www.easymapmaker.com/map/28cb3b8b3206c377a6f282d980dc7974
7
3rd QTR 2015 GREATER PHOENIX APARTMENT OWNER’S NEWSLETTER Kasten Long Commercial Grpup.
8
Click here: No Slowdown in New Construction in Q3 – Apartments
http://walter-unger.com/?p=15073
9
Click her to join my mailing list :
Walter Unger CCIM – walterunger@ccim.net – 1-520-975-5207 – http://walter-unger.com
2016 Official Arizona Visitors Guide
http://walter-unger.com/?p=13391
1
Timeline of Phoenix, Arizona history
http://en.wikipedia.org/wiki/Timeline_of_Phoenix,_Arizona_history
2
http://en.wikipedia.org/wiki/Phoenix,_Arizona
3
Facts of Arizona – year 1848 to 2013
http://walter-unger.com/?p=9507
Feel free to contact Walter regarding any of these stories, the current market, distressed commercial real estate opportunities and needs, your property or your Investment Needs for Comercial Properties in Phoenix, Tucson, Arizona.
walterunger@ccim.net 1-520-975-5207
Check out my professional profile and connect with me on LinkedIn.
https://www.facebook.com/ungerccim
https://twitter.com/Walterunger
https://plus.google.com/u/0/b/114560883588623379451/
Kasten Long Commercial Group tracks all advertised apartment communities, including those advertised by other brokerages. The interactive map shows the location of each community (10+ units) and each location is color coded by the size (number of total units).
Click here for Map of Apartments for Sale (10+units)
Walter Unger CCIM, CCSS, CCLS
I am a successful Commercial / Investment Real Estate Broker in Arizona now for 20 years. If you have any questions about Commercial / Investment Properties in Phoenix or Commercial / Investment Properties in Arizona, I will gladly sit down with you and share my expertise and my professional opinion with you. I am also in this to make money therefore it will be a win-win situation for all of us.
Please reply by e-mail walterunger@ccim.net or call me on my cell 520-975-5207
Walter Unger CCIM
Senior Associate Broker
Kasten Long Commercial Group
2821 E. Camelback Rd. Suite 600
Phoenix , AZ 85016
Direct: 520-975-5207
Fax: 602-865-7461
Reasons to Consider me for Commercial Referrals
Delivering the New Standard of Excellence in Commercial Real Estate
- Commercial Real Estate Scottsdale
- Commercial Real Estate Phoenix
- Commercial Real Estate Arizona
- Commercial Investment Properties Phoenix
- Commercial Investment Properties Scottsdale
- Commercial Investment Properties Arizona
- Land Specialist Arizona
- Arizona Land Specialist
- Land Specialist Phoenix
- Phoenix Land Specialist
- Land For Sale Phoenix
- Land for sale Arizona
- Commercial Properties For Sale Phoenix
- Commercial Real Estate Sales Phoenix
- Commercial Properties Phoenix
- Commercial Properties Arizona
- Commercial Land Specialist Phoenix
- Commercial Land Phoenix
- Multifamily land Phoenix
- Retail Land Phoenix
- Industrial Land Phoenix
- Land Commercial Phoenix
- Land Retail Phoenix
- Land Industrial Phoenix
- Land Multifamily Phoenix
- Industrial Land for sale Phoenix
- Land Industrial
- P
- Investment Real Estate
Disclaimer of Liability
The information in this blog-newsletter is for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.