Written by contributing writer Hayden Self, a graduate student in the MD-MBA program at Georgia Regents University.
In March, the Hull College of Business Augusta LEI decreased at a rate of 0.32% from February. It signals the first decrease in the LEI in the 12 month period since February of 2014. Despite this minor decrease in the index, the year-to-date rate of LEI growth from March of 2014 is still holding strong at 5.7%. This represents the second highest year-to-year growth rate in the LEI since December of 2013.
Seasonally adjusted new housing permits were down from the month prior by a rate of -6.6%, continuing the downward trend since December 2014. Unemployment insurance claims increased by 9.1%, reversing the downward trend observed over the prior months. Seasonally adjusted real deposits are down due to a 0.61% increase in the Southern regional CPI (Consumer Price Index), continuing the trend that began in February of this year. This CPI trend is, in large part, due to the more prominent contribution of motor fuel and seasonal apparel costs in the consumer budget from the prior month. The amount of job openings in the South area were also noted to contract at a rate -2.7%,continuing the overall decreasing trend that begin in the November-December period of last year. Despite this, this employment rate for the Augusta Metropolitan Area continued to increase from to February to March at a rate of 0.78%
Visible above in the table is the notable decrease in the year-to-year CPI in March compared to same period a year prior. The major contributor to this was the almost 1/3 decrease in motor fuel cost contributions to the consumer household budget during this past winter season compared to the year prior.
As seasonally adjusted employment rates continue to rise, March’s negative LEI movement may signal an upcoming decrease in this rate. What is particularly remarkable about this month’s LEI is that all five primary indicators contributed negatively to the March index. This is the first instance of this since August 2011.
However worrying as this may seem at first glance, it is notable that the next 6 month period after the last occurrence of this phenomenon was noted for a fairly consistent period of growth with only one following month showing negative LEI movement. This raises doubts over any meaningful foreseeable significance of all 5 indicators having negative contribution to the LEI for a single month and could very well be more coincidental rather than indicative of future negative economic activity. Growth seems to be more likely if, all things held constant, lower motor fuel prices continue at rates less than the year-over-year periods prior, thus allowing more discretionary spending locally.
Non-seasonally adjusted unemployment rates in the Augusta area decreased in March 4.6% compared to February and 11.7% compared to the March of 2014. Although this statistic reflects the most current, non-seasonally adjusted data, it can be possibly interpreted as an extrapolation of the continued decreasing unemployment rates that were prevalent over the later portion of 2014, as observed with the most current data below. As unemployment claim increases can signify an upcoming increase in the local unemployment rate, it may be reasonable to assume that a minor increase in unemployment may be likely in the upcoming months. This must be weighed against the relatively small increase in unemployment insurance claims from the month prior, however, and may not signify any meaningful change in the overall unemployment rate of the Augusta area.
Included in this edition of the Augusta Economic Report is real estate market data provided for the Augusta area courtesy of Blanchard & Calhoun Real Estate Company. The month of March was significant for a 14% increase in homes sold compared to February and a 9.6% increase compared to a year prior. This rounded off the first quarter of 2015 with a 19.1% total increase in homes sold compared to Q1 2014. Combined with a 10.3% increase in price per square foot sold and 12.2% decrease in total months of inventory based on closed sales for March compared to February of this year, the month of March saw the continuation of a gradual movement in the local housing market from a Buyer’s Market to a Neutral Market.
April MLS data continued to reflect a Neutral Market and witnessed a -4.8% change in homes sold from the month prior. This was observed in conjunction with a further appreciating price per square foot sold growth rate of 4.7% and a minor increase in the months of inventory based on closed sales rate of 5.5% compared to March. Although this reverses some of the momentum of the increased demand observed in March, the overall housing market demand appears to have increased compared to a year prior and may continue to remain in a more neutral market position compared to previous years. In view of the larger local economy as a whole, this may provide a further indicator of continued economic growth in the area, as overall market demand for goods, services, and real estate expands.
About the Index
The Augusta Leading Economic Index (Augusta LEI) is a monthly composite index that combines several national, regional, and local indicators into a single variable. Leading indexes combine variables that change before business cycle variables such as employment changes. Leading indexes may, therefore, indicate changes that could occur in the economy. Leading indexes are not forecasts or predictions about the future, but may signify future economic activity.
The Augusta LEI may provide local decision makers with timely information about future business cycle patterns in the Augusta area. The Augusta LEI uses economic indicators for the Augusta Metropolitan Statistical Area (MSA), which includes seven counties (i.e., Burke, Columbia, Lincoln, McDuffie, and Richmond counties in Georgia, and Aiken and Edgefield counties in South Carolina).
The index also includes regional and national indicators to reflect that national trends affect the local economy. The index is constructed in the same way that the Conference Board constructs the Leading Economic Index for the United States.