By: Elliott Pollack, The Monday Morning Quarterback

Higher than expected inflation reports led to a higher than expected rate increase by the Fed. All indications are that the Fed is deeply committed to getting inflation under control with the tools they have at their disposal and continued rate increases are expected over the next 18 months as long as high inflation persists. Last week’s meeting and the vote to increase the Fed Fund’s Rate by 75 basis points instead of the continued 50 basis point increases it had previously signaled sent a ripple effect across the markets and the overall economy. And while there is much of the equation outside of the Fed’s control, most notably the supply chain, all recent indicators point to a cooling economy.

The Fed has explicitly stated that recession is not the goal, but a slowdown is certainly an intended effect of their actions. So, although disappointing, none of the data should come as much of a surprise. Leading indicators declined for the second consecutive month, led by slowing housing construction, lower stock prices, and lower consumer expectations. Retail sales also declined in May, attributed to inflation, high gas prices, and higher borrowing costs for purchases such as cars. U.S. manufacturing grew, but at a slower rate than expected. And homebuilding starts and permits declined again in May. Homebuilder sentiment dropped once again, many pointing to the decrease in new home buyers and persistently high construction costs.

The stock market also fell into bear territory, meaning a 20% or more decline from the previous peak in early January. Stock market prices have historically been terrible predictors of recession. However, bear markets are more correlated to recession compared to the more common “correction” (a 10% or more decline in price).

All of this points to a greater likelihood of recession. The length and severity of recession, however, is still too early to predict. And just like the surprise the Fed gave everyone last week, a course reversal could happen just as quickly if economic stimulus becomes necessary again.

• The Conference Board Leading Economic Index declined 0.4% for the second consecutive month. The LEI level remained near all-time high levels, but the consecutive declines suggest weaker near-term growth, especially as the Fed fights inflation aggressively.
• Retail sales declined 0.3% in May. Consumers were affected by inflation, higher gas prices and interest rates which changed consumers purchasing decisions. May’s decline was the first month-over-month drop since 2022. There were declines in vehicle sales, furniture, online purchases and electronics as low inventory and higher rates (credit cards and car loans) pushed consumers to stop or postpone purchases.
• U.S. manufacturing continued to grow, but at a slower rate than expected. May’s level increased 0.2% to 105.7%. Economists’ expectations were for a 0.4% increase. While growth in the industrial sector is positive, the slowdown is another piece of evidence that the economy is slowing.
• As inflation and interest rates rise, prospective new home buyers have declined, bringing builder sentiment down, according to NAHB’s HMI index. June’s decline was the sixth consecutive monthly decline. Construction material costs continue to be high.
• Housing starts and permits declined again in May, according to the Census Bureau in its latest release. The SAAR for total starts dropped 14.4% from April and 3.5% from a year ago. Total permits increased 0.2% from a year ago, despite the 7.9% decline in single family permits.

• The Arizona Office of Economic Opportunity released non-seasonally adjusted employment figures for May and employment across the state fell by 5,500 jobs. The state averaged a loss of 6,700 jobs in May between 2010-2019. The majority of the losses were in the government super sector, with 6,700 jobs lost. The government sector includes state and local government education, which reported losses as the school year ended.
• Greater Phoenix and Greater Tucson reported job losses in May. Greater Phoenix lost 3,100 jobs and Greater Tucson saw a decline of 2,100 jobs.
• Year-to-date, the state is up 114,400 jobs. While the major metros of Phoenix and Tucson were up 85,400 and 14,700, respectively.

Phoenix, Arizona – ABI Multifamily, the leading multifamily brokerage and advisory services firm in the Western US, is pleased to announce the $4,750,000 / $56.67 Per Land SF sale of Apache & McClintock Development Opportunity, a land deal located at 1734 East Apache Boulevard, Tempe, AZ 85281. ABI Multifamily’s John Klocek and Patrick Burch represented the seller in this transaction.
The seller is based in Arizona.

The Apache & McClintock mixed-use development site is in a premiere location at the northwest corner of Apache Boulevard and McClintock Drive in the heart of Tempe. It is located at the intersection of two major thoroughfares and across the street from a light rail station. It is also a short walk / bike ride to the Arizona State University Campus, which is located just a mile away. With the ASU campus, Tempe Marketplace, the 101 Freeway, Tempe Beach Park, and the Mill Avenue corridor all just minutes away, this location is as central as it gets. Tempe Town Lake is also a short distance from the property where the 2 million-square-foot State Farm Campus sits, as well as where many new projects are underway. This makes this area of Tempe not only popular due to its proximity to the university, but also one of the most desirable areas in all of Arizona to live and work.

The Apache & McClintock development opportunity currently consists of a convenience store and gas station, a self-service car wash, and a small strip mall which all sit on 83,815 +/- square feet (1.92 +/- acres) of land. The property is currently zoned CSS (TOD) and allows for up to 25 du/ac, but is ideal for a redevelopment of a new Class A mixed-use project based on its location and proximity to the light rail. This project is currently on hold and the opportunity for redevelopment exists in the future. Tempe continues to be one of the most sought-after submarkets for multifamily, residential, and mixed-use development with its proximity to the largest university in the nation, its tremendous employment opportunities, and its convenient, centralized location. Significant employers in the area include Arizona State University, General Dynamics, U.S. Airways, Amazon, Microsoft, State Farm, and First Solar.

Joins executive leadership team, responsible for vision and growth of Scottsdale-based firm

PHOENIX, Arizona – Award-winning interior architecture firm Phoenix Design One Inc. (PDO) has promoted long-time team member Sophia Humphrey to the position of Principal. In her new role, Humphrey will continue to manage the PDO studio and directly oversee more than 40 buildings, of which PDO is the architect of record. She also joins the PDO executive leadership team, responsible for the vision and growth of the Scottsdale-based firm.

“Sophia is a tremendous mentor and is committed to continuously building PDO’s culture with an emphasis on fun, creativity and client care,” said PDO Principal Jennie Mayer. “She has exceptional talent and vision, both of which we know will help guide PDO into the future and build its next generation of leaders.”

Humphrey joined PDO in 2007, holding positions as Senior Project Manager and Associate. As Principal, Humphrey will continue to serve as a strong mentor in the PDO studio and support the continued education and creativity of her team. She will also continue to direct and expand the marketing presence for PDO within the industry.

PDO operates primarily in metro Phoenix, focused on office interiors but with a diverse portfolio that also includes medical, retail, education, financial and light industrial spaces. The firm has completed market-leading projects for companies such as Red Bull, Source, OH Partners and The Herb Box, as well as significant design and build-out activity within the high-demand, Class A speculative office sector.

Humphrey holds a bachelor’s degree in Interior Design from the Art Institute of Phoenix and a National Council for Interior Design Qualification (NCIDQ), the industry’s recognized indicator of excellence in interior design principles and commitment to the profession.