State business gauges shows signs of feeble recovery
State House News Service — Three economic indexes out Tuesday morning contained discouraging news for the state's economy, reflecting three straight months of diminished home sales activity and significant erosion of employer and consumer optimism.
Single-family homes put under agreement in Massachusetts during July were down 18 percent, compared to July 2009, according to the Massachusetts Association of Realtors. Condos put under agreement were off 28 percent, the association said. It's the third straight month that numbers were down in both categories.
In a statement, association president Kevin Sears said the numbers reflected efforts by buyers to act on sales prior an April tax credit deadline. The association says pending sales data, reflecting signed purchase and sales agreements, provide reliable information about where the real estate market is headed in the coming months.
"While it might take a little time to replenish the supply of buyers in the market, the combination of more affordable prices and super-low interest rates continue to be a good incentive, especially while there is a bit less competition for homes now compared to earlier in the year," Sears said in a statement.
State consumer confidence dropped in July to its lowest level since last October, reversing two consecutive quarters of growth and representing the steepest one-quarter decline since January 2008. The MassInsight consumer confidence index dropped 19 points to 61, far beneath the "neutral" rating of 100.
MassInsight said the loss was driven by decreased optimism on future expectations, as concern over current employment conditions drags down long-term optimism.
"It is all about jobs," MassInsight President William Guenther said in a press release. "One quarter of Massachusetts households had someone out of work in the last year and with no relief in sight, it's not surprising that confidence has collapsed again."
Business confidence fell below neutral in July, after advancing into positive territory the two month's prior, the largest setback since February 2009. The Associated Industries of Massachusetts (AIM) index fell 5.2 points last month to 48.5.
"We are seeing multiple indications that the economic recovery is losing steam, and these results suggest that there may be no further improvement in business conditions in the second half of 2010," Fred Breimyer, regional economist for the Federal Deposit Insurance Corporation, said in the index release. "Less confidence in the future among employers implies there may be less hiring, and a weak job market further undermines consumer confidence."
Small employers, who gained confidence in the spring, reversed course in July, with 46 percent providing a negative assessment of conditions for their operations, and 25 percent positive. That came after June showed a 46 percent positive/11 percent negative split in June. Employers outside Greater Boston were slightly more confident than those closer to the capital.
"Despite 14 gains in the previous 16 months, Massachusetts employers' doubts about the strength and staying power of the economic recovery have been evident throughout, and those concerns are now coming to the fore," said Raymond Torto, global chief economist at CB Richard Ellis Group and chair of AIM's board of economic advisors. "There are global as well as domestic issues in play — the fate on the euro, for example, will affect Massachusetts exports. The July survey results jibe with forecasts of weaker second-half growth, and reaffirm our expectation that this recovery would be long and halting."
MassInsight said the state's consumer confidence was 11 points higher than sentiment nationally, half the margin the Bay State claimed in April. AIM's index of business conditions in Massachusetts dropped last month, but remained above the U.S. Index of national conditions.