Tag Archives: economic indicators

Economic concepts

Understanding Economic Concepts, Applying In A Global Perspective

Within the past few decades we have become a global economy, which adds great opportunity but also risk. Our global economy is affected by many more factors today and is connected deeply with other countries. How does this affect the United Sates?

It can affect us in many ways. Before analyzing our global economy it’s important to understand the basics of economics and apply them today in a global perspective. Even though, government and other country’s policies differ, it is still important to understand the basic concepts.

Some of the key economic concepts to be familiar with are: supply and demand, fiscal policy, monetary policy, economic indicators, business cycles, inflation, deflation and stagflation.

Supply and demand

In regards to supply and demand, the supply is the amount available of a particular good or service, and the demand is what buyers are willing to pay for that particular good or service.

The price of the good or service is the primary element that can control the supply or demand of the good or service. Typically if a business lowers the price of a good or service the demand will increase. Whereas, by raising the price of a good or service, the demand will decrease.

Fiscal and monetary policy

Fiscal policy is another major influence in our economy. This is when the government, under the direction of congress, influences our economic activity by taxing, borrowing or spending. Monetary policy on the other hand, controlled by the Federal Reserve, can increase or decrease the U.S. money supply. The Federal Reserve has many tools to assist with monetary policy:

1) Reserve requirement for banks
2) Increase or decrease the discount rate
3) Open-Market Operation (the purchase and sale of U.S. Treasury securities)
4) Margin requirements

With these tools the FED can act immediately to tighten credit or encourage it. Many times both fiscal and monetary policy are used together to control inflation in the hopes of having real economic growth.

Economic indicators

Our economic activity can be measured by several factors and by using some leading indicators we can get a better feel on its activity. Some indicators that are important to track are: the average weekly hours of manufacturing production workers, average weekly new claims for unemployment, building permits for new housing, stock prices and our nation’s money supply. These allow us to see trends in our economic activity.

Business cycles

For many years economist have used business cycles to learn about trends in the market place. Typically, they can track expansion and contraction activity. Through research and historical market studies we have been able to provide an estimate on the time frame that our economy is in an expansion period or how long it has been in a contraction period. This may help investors to understand what stage we are at in the business cycle (Peak or Trough).

Inflation, deflation and stagflation

Next is understanding how our economy may react to an inflationary, deflationary or stagflation period. Each of these is very different and will cause our government, consumers and investors to treat their money differently.

During an inflationary period, we will experience a general increase of prices. This process will decrease the purchasing power of our U.S. dollar, hence, will slow spending. Whereas, in a deflationary period we will experience the opposite and see a decrease in the general level of prices. Usually consumers will spend more during these times. Stagnation is another concern and occurs when the production of a good has become stagnant and the price continues to rise. This can be very dangerous and cause an economic recession or even a depression. All of these must be in balance. If they get out of hand they can cause major shifts in our economy.

Having a general understanding of economic concepts can help investors learn about why our economy shifts and some of the important factors that need to be considered when investing in our evolving global economy.

For more information about the economic concepts discussed in this column, visit jacobgold.com.

Securities and investment advisory services offered through ING Financial Partners, Inc. Member SIPC. Jacob Gold & Associates, Inc. is not a subsidiary of nor controlled by ING Financial Partners, Inc.This information was prepared by Michael Cochell of Jacob Gold & Associates, Inc. and is for educational information only. The opinions/views expressed within are that of Michael Cochell of Jacob Gold & Associates Inc. and do not necessarily reflect those of ING Financial Partners or its representatives. In addition, they are not intended to provide specific advice or recommendations for any individual. Neither ING Financial Partners nor its representatives provide tax or legal advice. You should consult with your financial professional, attorney, accountant or tax advisor regarding your individual situation prior to making any investment decisions.
Sluggish Demand for Office Space in Phoenix

Sluggish Demand for Office Space in Metro Phoenix Continues

The Phoenix office market continued to feel the effects of a sluggish and wavering economy, according to Cassidy Turley BRE Commercial’s 3Q 2010 office market trends report released today.

Economic indicators remain mixed causing uncertainty as to whether our economy is headed into a “double dip” recession or a period of slow growth. The best word to describe market conditions during the third quarter is flat. Net absorption was negative for the second time this year and the overall vacancy rate increased 30 basis points to finish at an all-time high of 27.9%.

Tempe/South Chandler and 44th Street Corridor posted the largest gains in net absorption; collectively they gained more than 257,590 SF in the third quarter. Downtown North and Airport Area were the two submarkets with the largest declines in occupancy; they collectively lost 221,927 SF during the third quarter. The majority of leasing activity has been in space that is an upgrade to the tenant’s prior location, otherwise known as “flight to quality.”

This has been a trend for several quarters, as nearly all positive absorption, both the quarter and year-to-date, have come from either Class A buildings or new construction. Class A average asking rates continue
to decline as landlords compete for tenants by offering heavy concessions and discounted rates. Class A rental rates dropped nearly 2 percent in the third quarter to finish at $25.07.

With the extreme over-supply of space, overall asking rental rates will continue to soften but at a slower pace and should reach bottom within the next 12 months. Office market leasing is likely to remain flat through 2010 and improve gradually into 2011 as businesses start to add jobs and tenants take advantage of reduced rates. Landlords that have weathered the recession, remained financially strong and adjusted to current market conditions should start to see some relief as tenant demand gradually improves.

With large blocks of premium office space available, lower rental rates, a high quality of life, affordable housing and great weather, Metro Phoenix is positioned to attract companies looking to relocate or add to their current operations. These factors should improve leasing and owner occupant demand bringing some relief to the office sector.