Tag Archives: BMO Economics

Deloitte Report Reveals Mid-Market Companies Expect U.S. Economic Growth

BMO: Arizona economy will accelerate in 2015

Arizona’s economy should pick up in 2015, with expected GDP growth of 3.5 percent, just ahead of the national average and an improvement from the expected 2.5 percent in 2014, according to the bi-annual U.S. State Monitor Report from BMO Economics. Steady population growth and job growth in the high-tech market will also help lead the state’s economic acceleration.

Arizona is again outperforming when it comes to job-growth. Nonfarm payrolls rose 2.5 percent year over year in the fourth quarter. The service sector, led by professional and business services, education, health and tourism, has been responsible for the gains.

Robert Kavcic, Senior Economist, BMO Capital Markets, noted that better momentum could be on the horizon for manufacturing and construction employment. The unemployment rate continues its negative trend, 6.7 percent in December compared to 7.6 percent a year earlier. On the flip side, there is an underlying softness in the labor market as evidenced by average weekly earnings which were down 2.8 percent year over year in the fourth quarter.

”We continue to see increased activity in several sectors, including healthcare, trade and distribution,” said Tim Bruckner, Managing Director, Commercial Banking, Arizona, BMO Harris Bank. “We also know that the majority of Arizona businesses are planning to invest. We’re here to help support business owners as they lead Arizona’s economic recovery.”

The housing headwinds experienced in 2014 appear to be fading slightly with a decrease in rates and mortgage lending conditions somewhat softening. The S&P Case-Schiller Index reported that Phoenix prices are up year-over-year by 2 percent, but that is still a giant downward shift from the 20 percent-plus growth experienced early in the recovery. On the positive side, the vacancy rate is now back down to match the fifty-state average.

Stronger population growth is helping to drive an improved economy, which is steady at a 1.3 percent year-over-year clip. Overall interstate migration remains depressed, somewhat due to the impact the housing market’s decline has had on mobility.

“Population inflows for Arizona, while still positive, would be stronger were it not for the decline in the housing market,” said Mr. Kavcic.

To view a full copy of the report, visit www.bmocm.com/economics.

phoenix

Arizona economy rising, report shows

Phoenix and the broader Arizona economy are expanding again after an extremely difficult recession, although growth will be more modest than the boom times of a decade ago, according to a report released today by BMO Economics.

The labor market is a bright spot, with the city remaining consistent in its job growth performance.  “The city has been a consistent job growth outperformer so far during the recovery and, after a soft patch earlier in the year, growth has accelerated again,” said Robert Kavcic, Senior Economist, BMO Capital Markets.  “If the recent growth clip persists – and we believe that it should – the Phoenix economy should be able to add roughly 85,000 new jobs by the end of 2016.”

“It’s encouraging that the economic health of Arizona, and Phoenix in particular, continues to improve,” said Steve Zandpour, newly-appointed Arizona Regional President, BMO Harris Bank. “It’s nice to see construction activity again. Projects that had been on hold for quite a while have broken ground, adding another positive stimulus to the community.”

The Valley’s economic diversity will help it continue to recover at a solid pace.  “Phoenix boasts a diverse economy with exposure to a wide range of industries in high-tech manufacturing, construction, finance and professional services,” stated Kavcic. “Of the 250,000 jobs lost during the recession, nearly three-quarters of them have recovered.”

The finance and insurance sector employs more than 125,000 people – a record high, in the city.  The fast-growing biotechnology sector also has a strong presence in the region, with two new structures recently approved at the Phoenix Biomedical Campus, including a $136 million investment by the University of Arizona.

On the housing side, the foreclosure rate across Arizona has tumbled to below 1 percent – now among the lowest in America – while higher home prices have reduced the share of mortgages in a negative equity position.  “Fundamentals support a continued, albeit more modest, housing market recovery in the city,” said Mr. Kavcic.

To view a full copy of the report, visit www.bmocm.com/economics.

Economic concepts

Arizona Poised to See Above-Average Growth

Thanks to strong improvement in housing prices and improved population in-flow, Arizona should expect above-average growth through the year, according to the bi-annual U.S. State Monitor Report from BMO Economics. Expected real GDP growth in the state is 3.2 percent, up from a 1.8 percent rate currently expected for 2013.

Nonfarm payrolls in Arizona were up 2 percent in 2013 – above the national average. The unemployment rate edged up through much of 2013, but moved lower late in the year to finish at 7.6 percent, the lowest since late 2008 and a significant improvement from the recession high of 10.8 percent.

“Although unemployment in Arizona is still higher than it should be, there has been solid progress made in generating good paying jobs that will bolster our overall economy,” said Steve Johnson, Regional President, Arizona, BMO Harris Bank. “In particular we’ve seen a boost in professional services and the tourism industry, which is great news for business owners in those sectors.”

Population growth has picked up to a 1.3 percent year-over-year pace driven by the improving economy. While that is still below the 3.3 percent rate experienced during the housing boom, positive momentum is expected to continue through the coming years.

Reduced home inventories are allowing for improved construction activity, which was at a near stand-still during the recession.

“Arizona’s housing market is experiencing a strong recovery, despite a recent soft patch. According to the S&P Case-Shiller Index, Phoenix prices have surged more than 40 percent from their lows,” said Robert Kavcic, Senior Economist, BMO Capital Markets.

“While the increase in mortgage rates through the summer softened sales and home building activity, that should prove to be temporary. The foreclosure rate fell to 1.3 percent in the third quarter of last year, from its high of 6.3 percent. Additionally, surging home prices have reduced the number of home mortgages under water to less than 25 percent,” Mr. Kavcic added.

To view a full copy of the report, visit www.bmocm.com/economics.