Economic & Real Estate Report – 2Q 2018

U.S. economic growth rebounded considerably during 2Q18, largely driven by strong consumer spending with additional support from export growth and steady business investment resulting from continued deregulation. Consumers have likely benefited from a tighter labor market, the late‐2017 tax cuts and greater disposable income, which has increased purchasing power; however, growth is likely to moderate in the upcoming quarters as income has not accelerated to a pace which can sustain 4.1% quarterly growth.

Numerous key metrics were also reflective of economic strength during 2Q18, including:

(a) low unemployment rates and steady job creation
(b) steady May and June retail sales
(c) heightened consumer confidence levels
(d) favorable June readings for durable goods/factory orders and industrial production
(e) elevated manufacturing growth as tracked by the Institute for Supply Management (ISM).

Despite healthy demand for housing, limited supply, higher mortgage rates, rising material costs and scarcer labor have limited existing and new home sales and have created growing affordability issues. Also, several leading residential indices have indicated a plateauing in home prices with an uptick in inventory in select markets. Although rising U.S. trade protectionism did not appear to negatively impact 2Q18 growth, escalating trade tensions, brought on by President Trump’s tariffs on imported steel and aluminum being expanded in June to all major trading partners and uncertainty regarding retaliatory tariffs, add upside risk to future economic conditions.