Doomsday scenario haunts Utah and other Western States

 

 
Utah Economic Snapshot - First Five Months FY2009-10
 
Utah State Government

Local Government

Total Net Revenue - Five Months -11.4% (-$310.90M)
 
Source: Utah State Tax Commission,  TC-23 10/20/09

 

Global Business Confidence: +
The global economic data have taken on a somewhat brighter tone in recent weeks, but, according to the results of the global business confidence survey, the global economy remains stuck in a tentative global economic recovery. All of the survey responses took a bit of a step back last week, particularly outside of the U.S. Hiring intentions turned negative again, and while they have improved substantially since the beginning of the year, they remain consistent with more job losses. Sales and inventories also remain soft. Businesses remain upbeat about the outlook into next spring; in general, sentiment is more positive in South America and among professional and business service firms.
 
Treasury International Capital Flows: -$20.0 bil
Net long-term capital flows to the U.S. in October declined to $20.7 billion, from $40.7 billion the prior month, as recovery in key emerging market countries such as China, India and Brazil lowered investor risk aversion, driving up equity markets in these countries and lowering safe-haven interest in U.S. financial assets. Net foreign purchases of U.S. foreign securities declined to $43.4 billion in October from $55.7 billion in September as private foreign investors reduced their net purchases; foreign central banks and sovereign wealth funds increased their net holdings slightly and were less inclined to reduce their net holdings of government agency bonds, which suggests that confidence in this asset class is stabilizing.
 
Import and Export Prices: +1.7%
Import prices increased a larger than anticipated 1.7% in November, following an upwardly revised 0.8% gain in October (previously 0.7%). Excluding fuels, import prices rose 0.4% for the second consecutive month. Nonfuel import prices have increased in four consecutive months, which will help slow the descent in consumer prices. The larger than anticipated increase in import prices doesn't alter the forecast for core consumer prices to soften over the next few months. Because inflationary pressures are minimal, the Federal Reserve will keep interest rates unchanged until late 2010 or early 2011.
 
Current Account: -$108.0 bil
The U.S. current account deficit widened by 10.2% to $108 billion in the third quarter of 2009, compared with the revised second quarter deficit of $98 billion (previously $98.8 billion). Moody's Economy.com had expected a similar narrowing to $109 billion. The trade deficit widened from $81.2 billion to $97.4 billion. Meanwhile, the surplus on income widened by $600 million to $34.8 billion.
 
FOMC Monetary Policy:+0.25%
Although the Federal Open Market Committee announced that it will be keeping the fed funds rate target in the 0% to 0.25% range "for an extended period," the committee will be withdrawing some of extraordinary support it has provided over the coming months. In particular, the FOMC announced that it will allow a number of special liquidity facilities to expire in early 2010, as scheduled. The statement said that the recovery continues, with a broad improvement in economic activity. Given few inflationary pressures, an increase in the federal funds rate is unlikely for at least another year.
 
State Personal Income: 0.3%
Nationally, personal income growth during the third quarter averaged 0.3% following a 0.8% increase in income during the second quarter. Though overall income growth was slower, the composition of income was more encouraging, with earnings from work accounting for most of the increase as opposed to transfer payments, which accounted for most of the second quarter increase. Only seven states experienced declines in income. Across regions, the fastest income growth was 0.6% in the Mid-Atlantic states, and the slowest growth of 0.1% was in the Southeast.
 
Industrial Production: +0.8%
Factory output rebounded strongly in November, rising 0.8% after holding steady in October. Some recovery in manufacturing output seemed likely, as prior weakness had been out of line with the message coming from the monthly manufacturing surveys. The 1.1% rise in November manufacturing output, for both total and excluding motor vehicle production, was particularly encouraging. A turn in the inventory cycle is powering growth in manufacturing, though improving foreign and domestic demand is also playing a role.
 
Producer Price Index: 1.8%
Producer prices for finished goods rose sharply in November (1.8%), due in part to rising prices for food and energy products. Excluding food and energy, core prices for finished goods rose by 0.5%, largely offsetting the steep drop seen in October. Core prices for intermediate goods rose on the month as well (0.3%).

Business Inventories (MTIS): +0.2%
Total business inventories increased 0.2% in October, higher than expectations. This was the first increase in business inventories since August 2008 and shows that the inventory drawdown cycle is winding down. Manufacturers and wholesalers led the gain, as the level of retail inventory was unchanged over the month. The aggregate I/S ratio inched down slightly, now at 1.3 compared with 1.31 previously; the high was 1.46 in January.

Jobless Claims:+7,000
Initial claims for unemployment benefits increased for the second straight week, rising by 7,000 to 480,000 for the week ending December 12. Although recent improvement has stalled, this is not uncommon at this time of year considering seasonal adjustment issues surrounding the holidays. Meanwhile, continuing claims rose a scant 5,000 to 5.186 million for the week ending December 5. Generally, over the last several months, the trend in unemployment insurance claims has been consistent with gradual labor market improvement.

NAHB Housing Market Index: -1.0
Homebuilders grew more pessimistic during December. The NAHB housing market index fell by 1 point from November to a level of 16 as builders' sales expectations and their assessment of current conditions each slipped. The outlook for prospective buyers' traffic was unchanged for a third month, holding at a level of 13. Despite the index's overall decline, sentiment improved over the month in the Northeast and West.

MBA Mortgage Applications Survey:+0.3
In the week ending December 11, the MBA mortgage application indices were mostly unchanged. The market index increased just 0.3% from the week before, rising to 667.3. The purchase index slipped to 241.2, a decline of 0.1%. Finally, the refinance index-the big mover for the week-increased just 0.9%, finishing the week at 3,214.0

New Residential Construction (C20): 0.574 mil
On par with expectations, residential construction increased in November by 8.9% from October to an annualized 574,000 units. Census revised October's weak starts downward slightly. The multifamily component is driving the gains, but the single-family component increased by a solid 2.1%. Permits and completions are rising as well. After two consecutive month-over-month gains, completions are running at their strongest pace since the spring.

Consumer Price Index: 0.4%
The top-line CPI for urban consumers increased by a seasonally adjusted 0.4% in November; a large increase in energy prices was the primary factor driving overall prices higher. The top-line index is now up on a year-ago basis for the first time since February. The core index was unchanged on a seasonally adjusted basis from October to November and is up 1.7% over the past year. Inflation remains under control, and given the slack in the economy, core inflation will decline in the near term.

Chain Store Sales Snapshot:+ 0.4%
Chain store sales increased 0.4% in the week ending December 12, according to the ICSC sales index. This came on the heels of the seasonally typical post-Thanksgiving sales plunge that was seen in the week prior. Despite the weekly sales gain, growth on a year-ago basis decelerated to 2.4% as sales had grown more in the comparable week last year. Trends are pointing to shoppers delaying their holiday shopping.

Retail Sales: +0.6%
Retail sales jumped in November, led by gains at gas stations and electronics retailers. Sales rose 1.3% in total and 1.2% excluding autos but only 0.6% excluding gas stations as well. Performance varied widely across segments, from sharp declines at apparel and furniture stores to large gains at building supply, grocery and nonstore retailers. There was a notable downward revision to October growth, covering a large number of segments, although growth was still strong at 1.1%.

Oil and Gas Inventories: -3.7 mil barrels
Crude oil inventories fell by 3.7 million barrels for the week ending December 11, surpassing expectations of a 2 million-barrel decline. Distillate inventories fell by 2.9 million barrels versus the consensus expectation for a 500,000-barrel decline. Gasoline inventories rose by 0.9 million barrels, in line with consensus expectations. Refinery capacity utilization fell to 80.0% from 81.1%. Petroleum demand surged. This report will cause oil prices to rise.

Weekly Natural Gas Storage Report: -207.00 bcf
Working gas in underground storage fell by 207 billion cubic feet during the week ending December 11. The decline was much steeper than the consensus estimate of 178 bcf. This report will send natural gas prices higher.

 

Source: Economy.com