After seven and a half years of expansion, the economy is still chugging along. In fact, 2016 is drawing to a close with some of the strongest indicators of the year. Most notably, last week third-quarter GDP was revised upward to an annualized rate of 3.2%, its highest quarterly pace in two years, as corporate earnings and exports surged to join consumers in driving the economy forward.
Growth has continued into the fourth quarter with the Federal Reserve’s latest “Beige Book” reporting “that the economy continued to expand across most regions from early October through mid-November.”
Meanwhile, the Manufacturing Purchasing Managers’ Index (PMI) for both manufacturing and services continues to improve. The composite manufacturing index grew at its fastest past since June, with particular strength in the production component, while the services-oriented non-manufacturing index grew at its fastest rate in over a year.
On another positive note for the economy and property markets, the unemployment rate fell to 4.6% in November, its lowest rate in nine years, on the strength of 178,000 new payroll jobs. One downside to the strong jobs report, though: Wage growth fell 0.1% last month—not a material decline, but an unwelcome move in the wrong direction.
Conditions continued to firm in the housing market, too. As measured by the Case-Shiller index, the average price of single-family homes nationally finally reached a new peak in October (latest data available), although the big city indexes still lag their 2006 peaks. These gains came on top of a 25% jump in housing starts in October, the highest pace since August 2007, and a clear sign that homebuilders are ramping up construction to meet rising demand.
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Andrew J. Nelson is Chief Economist for Colliers International in the United States. Based in San Francisco, he covers a mix of general economic topics as well as related issues that bear on the performance of property markets.