Author: Jack Kleinhenz

Design Industry Business Conditions Remain On Solid Footing

Posted on by Jack Kleinhenz

Washington, D.C. (November 18, 2015) | The American Society of Interior Designers (ASID) released the third quarter Interior Design Billings Index (IDBI) on November 16, 2015. Billings by design firms ticked up slightly in September compared to June’s IDBI score of 57.1. The ASID indices are centered on 50 percent; above 50 indicates expansion and below 50, contraction. Based on the IDBI three-month moving average, billings have been in positive territory since the third quarter of 2011, and September’s score indicates positive revenue growth.

In addition, the September new product inquiry index score of 62.8 is up from the June score of 58.3 and has shown a series of steady positive scores since late 2011.

Business conditions vary by market specialization
Design firms specializing in single-family residential projects report growth during the second and third quarters of 2015, posting IDBI scores of 57.5 and 55.8 respectively. Through all of the second and most of the third quarters, with the exception of September, IDBI scores for retail, entertainment, office, and hospitality remained between 50 and 65. Meanwhile, the institutional sector billings continued to be erratic.

Construction spending continues rebound
Total new construction spending is approximately 13.7 percent above its August 2014 level. During the fourth quarter of 2015 it is anticipated that residential improvement spending will increase to $106.8 billion for the quarter, a year-over-year increase of 13.5 percent from the fourth quarter of 2014.

Six month outlook – stronger business conditions expected
While the six-month business conditions index score of 66 for September is down from the June score of 74, the consistency of these scores (above 50) in positive territory suggest ongoing continued expansion for the design industry.

“Overall economic growth has slowed due to economic crosscurrents during the third quarter, but consumer spending, along with long-awaited housing and construction activity, are providing needed fuel to keep the economy on track,” said Jack Kleinhenz, ASID economist. “The slightly slower U.S. economy should prove to be temporary and not prove to be a major speed bump for the design industry, and panelists remain positive about the near term outlook for the industry.”

Download the full third quarter ASID Interior Design Billings Index Report.

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About the ASID Interior Design Billings Index
The IDBI is produced by ASID Research, under the leadership of ASID Vice President of Research and Knowledge Management David Krantz in partnership with Jack Kleinhenz, Ph.D., and Russ Smith, Ph.D., both of Kleinhenz & Associates. The index, which was begun in November 2010, is a diffusion index compiled from a monthly ASID survey of 300 geographically diverse firms that primarily offer interior design services or offer interior design services as part of architectural, engineering, and other related practices. Resulting perspectives on current and future business conditions for the interior design industry are helpful indicators of changes in the direction of economic activity. The ASID indices are centered on 50 percent (above 50 indicates expansion and below 50 contraction).

About ASID Research
ASID Research provides the design industry with regular data, studies, and reports offering insight and analysis on the state of the industry and practice. Established to educate the design industry on the status of its health and the impact of design on the way we work, live and play, ASID Research offers quantitative and qualitative knowledge of the industry. Our goal is to provide observations, vision, and compilations that inspire and inform. Outcomes include the monthly ASID Interior Design Billings Index (IDBI), the ASID Industry Outlook report, third-party collaborations, and educational grants.

About ASID
The American Society of Interior Designers believes that design transforms lives. ASID serves the full range of the interior design profession and practice through the Society’s programs, networks, and advocacy. We thrive on the strength of cross-functional and interdisciplinary relationships among designers of all specialties, including workplace, healthcare, retail and hospitality, education, institutional, and residential. We lead interior designers in shared conversations around topics that matter: from evidence-based and human-centric design to social responsibility, well-being, and sustainability. We showcase the impact of design on the human experience and the value interior designers provide.

Published year:  https://www.asid.org/content/design-industry-business-conditions-remain-solid-footing#.VlSRx3arRD8
2015

 

ASID IDBI Third Quarter 2015

Posted on by Jack Kleinhenz

“Overall economic growth has slowed due to economic crosscurrents during the third quarter, but consumer spending,
along with long awaited housing and construction activity, are providing needed fuel to keep the economy on track.
Consumer and business spending should keep the design industry momentum in place for the near term. The slightly
slower U.S. economy should prove to be temporary and not prove to be a major speed bump for the design industry, and
panelists remain positive about the near term outlook for the industry.”

Chiappori and Kleinhenz Elected to NBER Board of Directors

Posted on by Jack Kleinhenz

NBER Board of DirectorsPierre-André Chiappori and Jack Kleinhenz were elected to the NBER Board of Directors at the board’s September 2015 meeting.

Chiappori is the E. Rowan and Barbara Steinschneider Professor of Economics at Columbia University, where he has taught since 2004. He will serve as the representative of Columbia University. Chiaporri’s research focuses on household behavior, risk, insurance and contract theory, general equilibrium and mathematical economics. Chiappori, who received his Ph.D. in economics from the University Paris 1, is a fellow of the Becker-Friedman Institute at the University of Chicago, the Econometric Society, the European Economic Association, and the Society of Labor Economists.

Kleinhenz will serve as the representative of the National Association for Business Economics, an association of which he is the past president. He is the chief economist for the National Retail Federation and the principal and chief economist of Kleinhenz & Associates, a registered investment advisory firm specializing in economic consulting and wealth management. Kleinhenz also is an adjunct professor of economics at Case Western Reserve University’s Weatherhead School of Management. Formerly with the Federal Reserve Bank of Cleveland and the Federal Home Loan Bank of Pittsburgh, he is a current member of the Governor of Ohio’s Council of Economic Advisors. Kleinhenz received his Ph.D. in economics from the University of Notre Dame.

The Board of Directors is the NBER’s governing body. It includes representatives of many U.S. research universities and national economics organizations, as well as business and labor leaders. The NBER is the nation’s leading nonprofit economic research organization. Twenty-four Nobel Prize winners in Economics and thirteen past chairs of the President’s Council of Economic Advisers have been researchers at the NBER. The NBER is supported by research grants from government agencies and private foundations, by investment income, and by contributions from individuals and corporations.

MONTHLY ECONOMIC REVIEW: OCTOBER 2015

Posted on by Jack Kleinhenz

National Retail Federation

Consumers remain resilient economic force — as long as they continue to spend

Households continue to do their part to keep the economy growing despite global crosswinds and a stronger dollar that restrained economic activity this summer. Though restrained, consumer spending is strengthening and the drop in energy prices is freeing up cash in consumers’ wallets to spend on big ticket-items and other goods and services. This bodes well for the ever-important upcoming holiday season.

Retail sales have been softer than expected recently, perhaps impacted by increased volatility in financial markets. But the most recent rebound in consumer sentiment suggests consumers are feeling more optimistic about current conditions and have favorable expectations about the near term.

Housing has been a bright spot in the in the economy and continues to be a positive force. Solid job growth, improving consumer confidence and still-low home mortgage rates are all propelling the housing market. This is a good sign since newly purchased homes need to be outfitted with retail products.

Inflation was modestly stronger in September, but it has been difficult to pass on higher prices as consumers remain price sensitive. Most of inflation increases have come in the services sector.

More drama could come this winter if Congress does not move quickly to complete work on the federal budget and debt ceiling. Continued debate would fall in the middle of the holiday season. If the issue amplifies on Capitol Hill, we could see a shift in consumer spending intentions.

Download this month’s report, which includes the following highlights:

  • Retail sales and holiday sales forecast
  • Job growth
  • Consumer prices
  • Gross Domestic Product
  • Job openings
  • Housing market index
  • Personal income and spending

MONTHLY ECONOMIC REVIEW: KEEPING AN EYE ON CONSUMER ELECTRONICS SPENDING

Posted on by Jack Kleinhenz

While the fundamental forces of shopping behavior are economic — including income levels, credit, wealth, job prospects and confidence — there’s another force that has a tremendous impact on how, when, where and even why people shop: technology.

With well over 30 million smartphones and tablets in the country, it is easier than ever for consumers to find ways to connect with their favorite brands and service providers.

One of the barometers of consumer expectations around technology spending is produced monthly by the Consumer Electronics Association. The CEA Index of Consumer Technology Expectations is a forward-looking indicator derived from a monthly survey that provides users valuable information about the purchase of consumer electronics over the ensuing months.

With the 2015 holiday season just around the corner, I’m already assessing what the trends will be around spending on new iPhones, tablets and other electronics. My colleague Shawn DuBravac, chief economist at the CEA, noted recent readings of their index indicate a steady pace of spending in the near future.

NRF’s holiday forecast comes in early October and like we do every season, we’ll be keeping a close eye on spending in this area.

This month’s full report includes these highlights:

Retail Sales

August retail sales, excluding autos, gas and restaurants, advanced 0.2 percent from July and are up 2.6 percent on a year-over-year basis.

Consumer Sentiment

The University of Michigan consumer sentiment index dropped 6 points to 85.7 in September.

Consumer Prices

The August headline consumer price index decreased 0.1 percent following a 0.1 percent gain in July and a 0.3 percent increase in June.

Gross Domestic Product

The second estimate of second quarter GDP surged to 3.7 percent following the initial estimate of 2.3 percent.

Housing

The National Association of Home Builders Index of Builder Sentiment rose to 62 in September, gaining 1 point from the previous month.

Employment

Private sector payrolls increased by 140,000 in August. Overall employment(public and private sectors combined) increased by 173,000 in August.

Retail Jobs and Openings

Employment in August, excluding automobiles, gas stations and restaurants, increased 6,700 to 12.87 million jobs seasonally adjusted, a gain of 202,000 from August 2014 employment.

Personal Income and Spending

Personal income increased 0.4 percent in July while personal spending increased 0.3 percent.

Leading Economic Index

The Conference Board’s Leading Economic Index increased by 0.1 percent in August and is 4.0 percent higher than August 2014.

MONTHLY ECONOMIC REVIEW: THE IMPORTANCE OF JOB OPENINGS AND HIRING DATA

Posted on by Jack Kleinhenz

No one ever said being an economist was easy, and when it comes to trying to map the current economic recovery, it continues to be most challenging and at times perplexing. From gross domestic product and consumer confidence to housing starts and unemployment, there are myriad ways to measure where we’ve been and where we’re going. However, one of the most telling sets of data is the monthly Job Openings and Labor Turnover Survey, known as JOLTS.

JOLTS collects data on job openings, hiring and “separations,” or employees leaving their jobs, giving us a much better look at all positions that are open — not filled — on the last business day of each month. A job is considered “open” only if a specific job exists, the work could start within 30 days and the firm is actively recruiting to fill the slot, thus painting a picture around business hiring intentions.

Hiring and separations are employer/employee relationships created or ended during the month. These include workers moving into and out of jobs or measures of “churn” in the labor market. All types of jobs, including full-time, part-time, seasonal and short-term, are counted. One important takeaway: If the number of workers quitting their jobs rises, which is included in separations figures, it implies that Americans are likely “confident” enough to leave their jobs and search for others. This release lags the larger Bureau of Labor Statistics monthly employment report.

Journalists, investors and traders, economists and policymakers have taken a special interest in JOLTS since the economic recovery began in June 2009. In fact, the Federal Reserve regularly cites JOLTS in discussions over whether to increase interest rates. It is one of Fed Chairwoman Janet Yellen’s favorite indicators. At a recent National Association for Business Economics policy conference, Yellen said “I am likely to supplement the data on employment and unemployment with measures of gross job flows, such as job loss and hiring, which describe the underlying dynamics of the labor market.”

With a slowly improving economy, this monthly release has become a much-followed gauge on the direction and pace of the economy. Here’s how the most recent JOLTS reports indicate that the retail industry is healthy and has returned to prerecession levels. (JOLTS data includes total retail employment for all retail sectors. NRF-defined segments, which exclude automobiles and gasoline, cannot be broken out.)

  • Retail job openings edged up for a third straight month to 539,000 in June. That was the largest number of openings in June in the past 15 years, suggesting that retailers are having success in filling jobs.
  • Hiring, which lags behind openings, increased in June to 792,000 from 782,000 jobs and was the strongest since November 2006, the month before the start of the “Great Recession.” It was also the highest level for any June since the country’s prior recession ended in November 2001. The “openings and hires measures” indicate employers are trying to fill more openings, signifying their contributions to the labor market and confidence in the economy.
Retail Hires and Openings
  • Total separations ticked up to 762,000 in June from 745,000, largely driven by workers quitting their jobs. This June had the fourth-largest separation level for any June since the series begin in 2000. While the term “quit rates” sounds negative, it has positive significance – an increase in quits implies that workers are confident enough to voluntarily leave current jobs for better ones. addition

Hires usually outnumber total separations, but during the Great Recession there were more separations than hires.

Retail Hires, Total Separations and Employment
All in all, the retail industry labor market is healthy relative to pre-recession levels, and recent trends show the retail industry and the broader labor market continue to tighten, which should put upward pressure on wages.

EXPECTATIONS OF STRONGER JOB GROWTH SHOULD LIGHT A FIRE UNDER RETAIL SALES FOR THE REST OF THE YEAR

Posted on by Jack Kleinhenz

Many say the only constant in life is change, and nothing could be truer for the retail industry. When it comes to retail sales, which depend on a multitude of factors but mostly the confidence and ability of consumers to spend — both on necessities and discretionary purchases — retailers know change is guaranteed.

Given that we are now at the mid-point of the year, it’s important to reassess where the industry stands as it relates to overall expected sales growth. There are plenty of factors to consider, and given the fluctuations in economic activity through the first half of the year, we believe it is necessary to adjust for the significant variances seen thus far in sales and consumer spending.

NRF in February forecast that retail sales would increase 4.1 percent through the year, including online and other non-store sales. Unfortunately, that outlook has not played out precisely as anticipated. A confluence of events — including treacherous weather through most of the winter, West Coast port disruptions, a stronger U.S. dollar, weak foreign growth and declines in energy sector investments — all significantly impacted retail sales so far this year, and have changed how future sales will shape up for the rest of the year. Additionally, household spending patterns have also recently shifted purchases toward services more than purchases of goods — another contributing factor to lackluster sales results.

As such, NRF is now forecasting that retail sales — excluding automobiles, gasoline stations and restaurants — will increase only 3.5 percent for the year. Online/non-store sales, which are included in the overall figure, are expected to grow between 6 and 8 percent the remainder of the year rather than the 7-10 percent initially forecast for the full year. And we expect gross domestic product to increase between 2.7 and 3 percent during the second half.

While many of the aforementioned factors will not likely be repeated in the coming months, there are some that could linger and somewhat cloud the economic outlook. The impact of the strong U.S. dollar on trade and lower oil prices on energy investments remain as headwinds and could further temper the pace of economic growth.

However, recent economic indicators do suggest that the economy is turning a corner, fortunately putting to rest any concerns that the expansion has stalled. My second-quarter estimates for economic growth are now above 2 percent, which suggests that first-quarter weakness was more of an aberration than a continuing trend. And the job market continues to make strides with nearly 3 million more jobs than a year ago.

We think we’ll see a better second half of 2015. Real consumer demand has actually been stronger than what nominal retail sales have indicated, and deflationary pricing is helping keep receipts low for U.S. households. Going forward, retail sales should register further strength, and resilient consumers should never be counted out.

As for the economy, we believe we’ll see continued growth but recognize that there are critical potential “tipping points,” including foreign markets and wage growth.

MONTHLY ECONOMIC REVIEW: READY FOR A REBOUND

Posted on by Jack Kleinhenz

Until recently, we have either received mixed or disappointing economic data. However, the newfound strength in the U.S. labor market will serve as a key factor for optimism moving forward. With job growth averaging more than 200,000 a month and wage growth showing marked improvements, the U.S. economy is ripe for continued household spending.

Additionally, the rebound in retail sales in May serves as a positive indication of growth in Gross Domestic Product for the second-quarter. With consumer spending accounting for nearly 70 percent of economic growth, positive reports in our nation’s GDP will be a key determinant in the months ahead.

The economy struggled coming out of the gate in 2015 just like it did in 2014, and the economic outlook has not played out precisely as we had anticipated when we released our annual forecast earlier in the year. After a weak first quarter, the economy found its footing this spring and is expected to continue its rebound. Nonetheless, our forecast of 4.1 percent for the year will likely need to be updated to account for these changes.

This month’s full report includes these highlights:

Retail Sales

Consumer spending and retail sales rebounded in May signifying renewed momentum heading into the second half of the year.

Consumer Sentiment

June’s preliminary University of Michigan consumer sentiment index climbed 3.9 points from May’s 90.7 to 94.6, with much of the gain due to consumers’ belief that current economic conditions have improved.

Consumer Prices

The March headline Consumer Price Index rose 0.4 percent between April and May, somewhat slower than expected.

Gross Domestic Product

Net exports hampered GDP growth in the first quarter. Much of the volatility in the trade deficit was due to the West Coast port slowdown, taking off nearly 2 percentage points from GDP growth.

Housing

The June NAHB housing market index jumped to a reading of 59 from 54 in May, a much stronger than expected score.

Employment

The labor market received a surprise in June as the Bureau of Labor and Statistics reported private sector job growth of 260,000.

Retail Jobs and Openings

Employment, excluding auto, gas and restaurant sales, increased 23,800 in May to 12.81 million jobs seasonally adjusted, a gain of 242,700 from May 2014.

Personal Income and Spending

April Personal Income rose 0.4 percent and Personal Consumption Expenditures was flat. On a year-over-year basis, personal income is up 4.1 percent while consumption is up 2.7 percent.

Leading Economic Indicators

The Conference Board’s Leading Economic Index increased 0.7 percent in May, matching April’s increase.

MONTHLY ECONOMIC REVIEW: CONSUMERS ARE IN THE DRIVER’S SEAT

Posted on by Jack Kleinhenz

When it comes to the U.S. economy, one can’t help but feel a sense of déjà vu. Similar to last year, unseasonably cold weather and lingering caution among budget-conscious consumers have dampened economic activity since the first of the year. However, as we head into the second quarter, I expect we’ll see that the consumer is actually more in the driver’s seat compared to this time last year. Lower energy costs, rising home equity, job and income gains and increased buying power from the stronger U.S. dollar will all continue to positively contribute to greater consumer spending ability — a key factor for further economic gains.

Other positive factors that will continue to influence improved growth in consumer spending include growth in real disposable income, which has grown 4 percent on a year-over-year basis ending in February — the fastest rate seen in two years — and stock market gains that are about 12 percent above this time last year. Additionally, housing price appreciation and decreased household debt burdens are at their lowest in at least 35 years, contributing to bigger gains in consumer confidence.

Economic expansion in the United States is expected to continue, but the burden of carrying the world economy on its shoulders could be an obstacle on the path toward stronger U.S. gains.

This month’s full report includes these highlights:

Retail Sales

Retail sales (excluding automobiles, gasoline stations and restaurants) reversed course and increased 0.5 percent in March after dropping 0.4 percent in February.

Consumer Sentiment

The University of Michigan consumer sentiment index beat expectations in the first half of April, increasing to 95.9 from March’s average of 93.

Consumer Prices

The March headline Consumer Price Index rose 0.2 percent between March and February. This was the second positive reading in five months.

Gross Domestic Product

The third estimate of fourth-quarter GDP reflected no change to the 2.2 percent rate from the second estimate.

Housing

Single family starts rebounded by 4.4 percent to 618,000 units in March and homebuilding is off to a good start. Weather appeared to play a negative role earlier this year not only on starts but on completions.

Employment

Job growth slowed in March as private payrolls rose an anemic 129,000. Overall employment (public and private sectors combined) increased 126,000 in March.

Retail Jobs and Openings

Total retail employment across all industry segments increased 25,900 to 15.6 million in March. There were 463,000 job openings in the retail industry on the last business day of February.

Personal Income and Spending

Personal income rose by 0.4 percent in February while personal consumption inched up only 0.1 percent.

Chicago Fed National Activity Index

The economy was growing even slower last month according to the Chicago Fed National Activity Index which recorded activity dropped to -0.42 in March from -0.18 in February.

Download the full report (PDF)

THE GREATEST SURVEY YOU’VE NEVER HEARD OF

Posted on by Jack Kleinhenz

Have you ever heard of the ACS?  Well, don’t feel too bad. Most people haven’t heard of it either — and that could potentially be a big problem for retailers throughout the country.

ACS stands for the American Community Survey, a rolling survey conducted by the U.S. Census Bureau. It provides the nation’s only source of comparable, consistent and timely demographic and socioeconomic data and information on U.S. communities.

The ACS data helps instruct the allocation of federal, state and local government assistance and grants to the tune of $400 billion a year. And it’s used by various organizations, sectors and businesses — including and most importantly — retailers and merchants.

The survey provides a benchmark that supplements and supports retail-related data in a variety of ways, such as advertising, capital investment, distribution, hiring, marketing, merchandising and store and warehouse location selection.

The ACS powers the strategically important short-term and long-term business decisions of the nation’s retail industry and helps answers questions like:

  • Can this community support a full spectrum of retail outlets and merchandise?
  • Will we see effective return on investment from running an advertising campaign in this community?
  • Where should we locate a distribution center, store or warehouse?

The ACS helps both public and private organizations make informed decisions on the outlay of financial and fiscal resources. But all that could be put in jeopardy due to misinformed legislative action.

There are efforts afoot in Congress through the appropriations process to seriously defund, alter or repeal the survey. While some lawmakers’ concerns are justified, especially in regard to protecting privacy, any movement away from a fully-funded, annual ACS survey could do unreasonable and irrevocable harm to this important economic, government and retail resource.

Retailers and allies in the advertising, manufacturing and warehousing industries are working closely with policymakers to ensure that they understand the importance of this publicly available and data-rich survey.