Global Business Confidence + Based on responses to the global business confidence survey in recent weeks, it appears that the Great Recession is over, but the nascent economic recovery is not quickly gaining traction. The responses to the questions posed in the survey remain positive on net, but barely so. Businesses remain more upbeat about the outlook into next year and broader economic conditions, and dourer when considering the strength of their sales and intentions to hire. They are no longer slashing inventories and cutting office space, but they are not adding to them either. South Americans are the most positive, and North Americans generally the most negative.
 
ECRI Future Inflation Gauge-North America: 1.0%
The U.S. future inflation gauge for September increased to 90.6 from 89.7. The smoothed annualized growth rate rose to 12.1% from 6.6%. The U.S. FIG has been on a steady trend higher for the last six months, though remains low. The FIG is beginning to point to budding inflation pressures in the future.

Monster Employment Index: -1.7%
Between August and September, the level of online help-wanted ads placed by U.S. employers dipped modestly, and it remains a little higher than the level at the beginning of the year. The Monster employment index fell by 2 points between August and September to a level of 119, representing a decline of 1.7%. Over the year, the index is down by 25.6%, which is a slightly larger rate of decline than during August. The outcome underscores that employers remain reluctant to take on additional workers, and it suggests improvement in the labor market over the next several months will be sluggish.

Factory Orders (M3): -0.8%
Orders for manufactured goods fell 0.8% in August following a 1.4% increase in July. Orders excluding transportation rose 0.4%. Durable goods orders were down 2.6% over the month, and nondurable goods orders/shipments were up 0.8%. Overall shipments fell 0.3%, reversing the gain in July. Inventories continued to fall, and the I/S ratio edged down to 1.38 months.
 
California Manufacturing Survey: 8.7 pts
California's manufacturing industry expanded in the third quarter, the first time since the first quarter of 2008 that the industry has grown. The composite index rose to 53.8 from 45.1 in the second quarter. Thursday's positive report is consistent with other regional manufacturing surveys that have shown modest production gains so far in the second half of the year.

Wholesale Trade (MWTR): -1.3%
Wholesale inventories declined by 1.3% in August, following a downwardly revised 1.6% decline in July. Sales rose by 1% in August, as durable goods sales rose strongly. July sales were revised higher from a 0.5% increase to a 0.6% increase. The inventory-to-sales ratio declined by 3 basis points to 1.2 from an unrevised 1.23 in July.

Wholesale Trade (MWTR): -1.3%
Wholesale inventories declined by 1.3% in August, following a downwardly revised 1.6% decline in July. Sales rose by 1% in August, as durable goods sales rose strongly. July sales were revised higher from a 0.5% increase to a 0.6% increase. The inventory-to-sales ratio declined by 3 basis points to 1.2 from an unrevised 1.23 in July.
 
Challenger Report: Lowest since March 2008
The number of workers affected by job cut announcements declined again in September, to 66,404. This is the lowest number since March 2008. The diminishing number of announcements supports other labor market indicators that suggest the drag on the labor market from layoffs is diminishing.

Jobless Claims: +17,000
Initial claims for unemployment benefits reversed the prior week's decline, increasing by 17,000 to 551,000 for the week ending September 26. Meanwhile, continuing claims remained on their general downward trend, falling by 70,000 to 6.09 million for the week ending September 19. Labor market conditions are improving unevenly, and this week is a reminder of how gradually progress will come

Employment Situation: 9.8%
The September employment report paints a grim picture of the labor market. September payroll losses increased to 263,000, from 201,000 in August. Private sector losses increased from 182,000 to 210,000. The unemployment rate edged higher to 9.8%, but labor market slack increased considerably more since the labor force contracted sharply. Losses for August were smaller than the preliminary estimates had indicated but the July loss was revised higher.

ISM Manufacturing Index: -.3 pts
The recovery in manufacturing took a breather in September. The Institute for Supply Management's manufacturing index fell from 52.9 to 52.6 in September. Although the index is still consistent with expansion in both manufacturing and the broader economy, September's dip is a subtle reminder that the recovery will be gradual and uneven. The details of the September report were less upbeat for future growth, however. Supported by slower inventory liquidation and a rise in real consumption, we maintain our forecast for real GDP to grow 3% at an annual rate in the third quarter, before moderating in the final three months of the year.

Construction Spending (C30):+ 0.8%
Construction spending for August surprised on the upside and increased by 0.8%, an important change in comparison with the 1.1% decline in the revised July construction spending level. Private residential construction led the increase, growing by 4.7% from July to August, more than offsetting slight declines in private nonresidential and public construction. Total construction spending is still 11.6% below its August 2008 level, so there is still a long period of recovery ahead.

Personal Income:+ 0.2%
Personal income rose 0.2% in August, slightly faster than expected after posting a similar reading in July (previously reported as unchanged). The saving rate plunged to 3%, as consumers aggressively responded to the cash for clunkers incentive despite the lack of income growth. Wage income rose modestly for the second straight month after a string of eight consecutive declines. Spending soared 1.3%, lifted by vehicle sales, following a 0.3% gain in July (previously 0.2%). Real spending jumped 0.9%. The core PCE deflator rose 0.1% for the fourth straight month. The top-line deflator rose 0.3%.

Consumer Credit (G19): -$12.0 bil
Consumer credit balances fell slightly more than expected in August. Total credit fell by $12 billion to a total of $2.463 trillion. The decline in revolving credit accelerated in August. However, increased new vehicle sales helped nonrevolving credit decline at a slower pace.

Household Credit Report: -3.9%
Aggregate credit conditions are still weakening, but at a much slower pace in recent months. The aggregate delinquency rate dipped in September, although default rates continued to rise both in aggregate and within most segments. At the same time, borrowing is shrinking rapidly. Balances were nearly 4% below where they were last September, while the month-to-month decline was steep.

Case-Shiller® Home Price Indexes: -15.0
The Case-Shiller® Home Price Indexes reversed course in the second quarter, rising nationally as well as in a large number of regions. The CSI™ increased on a q/q basis in six of the nine Census divisions. In the three divisions (Mid-Atlantic, Mountain, and West North Central) that still suffered from falling prices, the decline lessened compared with the previous quarter.

Pending Home Sales: +6.4%
The pending home sales index rose by 6.4% between July and August, coming in at a level of 103.8. The increase greatly exceeded expectations for a modest decline in pending sales. The large gain has brought the index to its highest level since March 2007. All four regions of the nation shared in the uptick in contract signings, although the West and Northeast experienced the largest over-the-month increases.

Vehicle Sales - AutoData: 2.8 mil
As expected, light vehicle sales fell sharply in September following the expiration of the cash for clunkers program. Depleted inventories also contributed to the decline in sales. Sales fell to 9.2 million units seasonally adjusted annualized rate, from a 14 million unit in August. However, the September pace is only slightly below the average for the first half of the year, prior to the introduction of the cash for clunkers program, and ties the Both cars and light trucks fell sharply.

MBA Mortgage Applications Survey: +16.4%
The MBA market composite indices rebounded nicely in the week ending October 2, led by a surge in refinance applications. The overall market composite index increased 16.4% from the previous week. Although the refinance index had the larger weekly increase of 18.2%, the purchase index did not lag behind by much, recording a gain of 13.2%. The level of mortgage applications remains on the general upward trend that it has held since February.
 
Chain Store Sales: +0.1%
Chain store sales rose a slight 0.1% in September as easing comparisons, calendar and weather effects lifted sales to the first increase since July 2008, according to the ICSC. While consumer fundamentals are becoming a little less bad, the improvement is more a testimony to easing comparisons and special factors than spending strength. Consumers remain reluctant to spend. Luxury sales are underperforming, while discounters did better as consumers are focused on necessities.

Oil and Gas Inventories: -1 mil barrels
Crude oil inventories fell by 1 million barrels for the week ending October 2, contrasting with the consensus expectation of a 2 million barrel increase. Gasoline inventories rose by 2.9 million barrels, while distillate fuel inventories rose by 700,000 barrels. Refinery capacity utilization rose to 85% from 84.6%. Petroleum demand fell. This mixed report will have little effect on oil prices.

Weekly Natural Gas Storage Report: +69.00 bcf
Working gas in underground storage rose by 69 billion cubic feet during the week ending October 2. The consensus estimate was for a build of 60 bcf. Thursday's inventory report should put downward pressure on natural gas prices.

Source: Economy.com

3rd Quarter Salt Lake Office Market Report Summary
 
Vacancy
Office direct vacancy has risen to 15.0% at the end of the 3rd Quarter of 2009, up from 13.6% compared to the 2nd quarter of 2009.  Class B and Class C buildings have been impacted the greatest, both showing a 35% increase in vacancy and Class A buildings only showing a 5% increase in vacancy during the last12 months.  
  
Rental Rates
Overall asking lease rates are beginning to trend slightly downward in every submarket in the Salt Lake valley from a year ago. The pressure is mounting for landlords to offer greater concessions to lower their lease rates for current and future tenants as activity in the market decreases and new product is brought on-line.
 
Absorption
The positive absorption reflected at mid-year 2009 has been surpassed by the registering of 257, 400 SF of negative absorption in the 3rd quarter, resulting in a year-to-date negative absorption of 81,840.  No particular submarket was immune to tenants downsizing is a direct result of job losses and the national economic crisis.
 
Construction
Six new buildings totaling 311,400 SF have been delivered year to date.  Two additional buildings totaling 435,400 SF are scheduled to be completed in the 4th quarter.  New construction has drastically slowed with only 279,500 SF of known construction to be delivered in 2010 as compared to the previous ten-year average of 910,000 SF.
 
Forecast
The Utah office market will continue to weather the national economic crisis better than most office markets around the country.  The government's continued investment in the valley wide transportation system, the estimated $1.5 billion in construction of the City Creek mixed-use project in downtown Salt Lake City and the slowing of speculative office inventory is laying the ground work for the rebound of the Salt Lake valley office market.

Source: Commerce CRG, Dana Baird