United States


July 28, 2017 




United States


  •  Mall Owners’ Comp Cut Amid Retail Rubble

  • Earnings watch: 10 sectors in the S&P 500 are reporting year-over-year earnings growth in Q2, led by the Energy, Information Technology, and Financials sectors. The only sector reporting a year-over-year decline in earnings is the Consumer Discretionary sector.

United Kingdom

  • London’s Walkie Talkie Tower Sells for a Record $1.7 Billion. Land Securities Group Plc and Canary Wharf Group Plc agreed to sell the skyscraper to Hong Kong- based LKK Health Products Group Ltd.
  • Norges Bank Real Estate Management signed agreement to acquire a 100% interest in 6-8 Boulevard Haussmann (Paris) for EUR462m. The acquisition was made without any financing.


  •  GDP rose by 0.6% MoM in May—more than triple forecasts—and puts the annualized expansion of 4.6% on track for the fastest pace of growth in 17 years.  


Deeper Dive 


1)     Three Take-Aways from Q2's GDP Report

The Bottom Line:  More than 8 years into the recovery, the US now in the third longest—but also the slowest—expansion since World War II, with GDP growth averaging a little more than 2%.

A)    Strong Consumption.

Consumption rebounded in Q2, led by a sharp increase in the purchase of durable goods.  After declining by 0.1% in Q1, durables rose by 6.3% in Q2 (although auto sales did NOT contribute to the gain.)

 B) Large decline in residential investment; investment in building structures was weak too.  

Whereas residential investment declined and shaved more than ¼ of a point off GDP, non-residential investment was strong, adding more than 0.6 percentage points of the 2.6 percent gain in Q2 GDP.  However, most of this gain came from investment in equipment.  Investment in commercial office/healthcare structures was negative;  any gain on the non-residential structures side was due to greater investment in mining structures (wells, etc.)  

C) Inflation is still nowhere to be found.  

Core PCE (personal consumption expenditure prices) rose by just 0.9% (annualized) in Q2, a slowing from Q1’s 1.8% gain.  YoY, core prices are up just 1.5%.  Partially to blame? Declining prices in the goods we buy.  Goods prices fell 0.5% in 2013, 0.3% in 2014, 2.9% in 2015, 1.4% in 2016 and are down 0.1% YoY in Q2.  

2) On Employment Costs' Deceleration: Wages Down, Benefits Costs Up

The Bottom Line:  The Employment Cost Index, the broadest measure of labor costs (since it is not affected by the change in the number of people employed in “low-wage” vs.  “high-wage” jobs) increased by just 0.5% in Q2 vs. Q1, after accelerating 0.8% during the first quarter. In the private sector, wages and salaries increased 2.4% for the current 12-month period (vs. 2.6% a year ago.) The cost of benefits rose 2.2% for the 12-month period ending in June 2017, higher than the 1.7 percent increase in June 2016. Note:  wages and salaries typically make up about 70 percent of compensation costs; benefits make up the remaining 30% of compensation.





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Heidi Learner

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