Hotel Industry Overview: Summer 2013


Hotel Industry Overview: Summer 2013

Summary of Key Performance Indicators

RevPAR trended downwards during the second and third quarters, with the national average clocking in below 5%, compared to over 7% for the first quarter. The Q2 performance was not entirely unexpected as June 2012 was extremely strong due to the midweek timing of last year’s Fourth of July holiday which shifted demand from July to June. July 2013. So far in Q3, transient demand has been strong but group has been flat to slightly down, which has held back overall RevPAR performance.


Luxury and upper upscale continue to outperform, especially in urban locations, notching RevPAR in excess of 6% due in part to strong April performance arising from group travel patterns which were affected by this year’s early Easter. Midscale lagged, as did economy sector and rural/highway locations. Resorts and suburban were in the middle of the pack.


Individual markets have varied considerably. Hawaii (especially Honolulu), San Francisco, Nashville and Houston have consistently done well, averaging double digits so far in Q3. Washington DC and Norfolk remain in negative territory, while Boston and most of the other Northeastern markets are close to flat. Florida is running slightly below average, while the Midwest and the West (except for San Diego, which is flat) are generally doing well.


New supply continues to gain momentum, although it is still running below the long term average of 2.0% annual growth. Lodging Econometrics, the industry authority on supply, projects that new hotel openings will amount to 1.1% of existing inventory in 2013, rising to 1.3% in 2014 and 1.6% in 2015, which is still well below the 2008 peak of 3.0%.


10 out of the top 25 markets are currently seeing growth in excess of 2%, including New York (10.5%), Nashville (5.4%), Denver (4.1%) and Washington DC (2.8%). On the other hand, Honolulu, San Francisco, Minneapolis and Norfolk have minimal hotel construction activity.


Q 3 2013 (thru 8/3)   Q2 2013   Q1 2013
Industry Total 4.0% 0.9% 4.9%   3.7% 1.1% 4.9%   5.4% 1.7% 7.2%
Luxury 6.4% (0.1%) 6.3% 5.0% 1.4% 6.5% 7.7% 4.3% 12.5%
Upper Upscale 4.4% 1.3% 5.8% 4.7% 1.3% 6.1% 4.6% 2.0% 6.7%
Resort Na Na 4.0% Na Na 4.5% 8.9% 2.0% 11.2%
Key Markets
NY 3.2% (0.5%) 2.7% 4.0% 0.9% 4.9% 8.1% 7.6% 16.7%
Boston 0.5% (0.7%) (0.3%) 2.4% (1.1%) 1.4% 2.9% 2.5% 5.7%
DC (1.8%) (6.0%) (7.6%) 1.0% (2.7%) (1.5%) 4.6% 1.3% 6.4%
Chicago 7.9% 211% 9.1% 6.2% (0.1%) 9.7% 3.3% 4.4% 3.6%
SF NA NA 15.0% 10.9% 4.5% 16.1% 3.6% 2.1% 4.0%
LA 2.9% 1.5% 4.5% 5.8% 1.3% 7.2% 5.6% 3.3% 9.1%

Source: Smith Travel Research, Deutsche Bank, Sun Trust Robinson Humphries


Major public company upper upscale and luxury brands continue to mirror these trends. This past quarter, Starwood and Marriott slipped a little, while Hyatt reversed its trend and outperformed. As noted below, issues remain in the group and government sectors, which tend to impact most heavily on the urban and suburban full service upper upscale brands that have historically been the bread and butter of these companies.


Q2 2013

Rolling 4 Quarters

Marriott Full Serv. 4.4% 0.8%


4.5% 1.3%


Ritz-Carlton 5.1% 2.2%


5.2% 1.7%


Sheraton 4.5% 0.3%


3.8% 1.5%


Westin 3.2% 1.7%


3.6% 1.0%


Luxury Collection 6.3% 2.5%


5.0% 2.0%


W 3.7% 0.9%


5.6% 1.4%


Le Meridien 2.9% (0.7%)


3.1% 0.5%


Hyatt 4.5% 0.9%


4.3% 0.1%


Source: Company earnings releases



The hotel industry keeps moving forward in the recovery cycle, but there is now no question that we are in the mature phase, or “middle innings” in the common vernacular. RevPAR guidance from the public companies and the major consultants has generally narrowed, with the top end being trimmed. The consensus seems to be around 5% for the rest of the year, which would be consistent with how Q2 and Q3 have performed after a very strong Q1. For 2014, the outlook is for improved performance based on continued gradual strengthening of the domestic economy coupled with below-average supply growth. PKF is optimistically predicting 7.7% national RevPAR growth, while PWC recently released a figure of 6.2%. STR is projecting 6.0%, but they have not updated their official estimate since early 2013.


Transaction volume has surged over the past few months with several high profile acquisitions including Omni’s purchase of a 5 hotel resort portfolio from KSL and Host Hotel’s sale of a San Francisco Ritz to Thayer. Overall deal volume is up 20% compared to a year ago, as several large portfolios have changed hands. In many markets, properties are now trading at or above replacement costs. This normally triggers a wave of new construction, but so far this has mostly been focused on select-service properties in strong markets. Full service hotels are generally only being built in conjunction with convention facilities, as those are still tough without significant financial assistance such as tax credits and/or programs like EB-5 and other highly levered financing vehicles. Conventional financing for new construction is available, but lenders are selective, requiring well capitalized sponsors.


Also of note, Blackstone has recently announced a series of mega-deals that could shake up the industry, starting with some moves towards the long awaited Hilton IPO. They have hired a “dream team” of investment bankers (Morgan Stanley, Deutsche Bank, Goldman Sachs and B of A/Merrill Lynch) to try to restructure approximately $13 billion of debt in advance of the IPO now planned for early 2014. Blackstone bought Hilton for about $26 billion including assumed debt in 2007. Not only was this the largest lodging industry deal ever done, it also ranks in the top 10 largest LBO’s in any industry. Blackstone also recently announced that it is putting the La Quinta chain up for sale. It has approximately 800 hotels, about 2/3 of which are owned with the balance franchised. The price is reportedly about $4.5 billion, about twice what they paid for it in 2006. Potential buyers might include Wyndham and Hospitality Properties Trust, who had expressed interest to Blackstone earlier this year. Morgan Stanley and JP Morgan will be providing advice to Blackstone. Rounding out the trifecta, Extended Stay America has filed for an IPO, which would most likely be a late 4th quarter execution. They are presently owned by a venture between Blackstone, Paulson and Centerbridge Partners, and had filed for bankruptcy in 2009 due to inability to service the crushing debt load accumulated during their LBO. The filing is for $100MM, but management has reportedly indicated that they could raise as much as $500 million. Deutsche Bank and J.P. Morgan Chase have been engaged to lead the offering.


Interest rates have backed off a little from their recent peaks, but are holding steady at the elevated levels. 10 year Treasuries are now around 2.60%, compared to 2.73% in early July, but they still are 100 bps above year-ago levels and 80-90bps above where rates were as recently as 90 days ago. This is illustrated in the chart below; note that spreads have remained fairly stable. Capital remains available, albeit at a slightly higher cost, as more lenders are competing for fewer deals. Some fairly large CMBS transactions are in the process of being finalized, most notably Chatham’s $950MM loan on the Innkeper portfolio being financed by Cerberus; this facility has been increased from $850 million due to strong interest from high-yield investors for the mezzanine tranches.. With increased competition from non-traditional lenders, the supply-demand imbalance for loans could keep rates low in the near term, which would be a positive for hotel valuations and a boon to private equity investors that are so dependent on leverage.



The principal negative trends seem to be in the areas of group and government, which are mostly due to the attempts to control government spending by reining in “extravagant” travel with a ripple effect through private industry sectors who takes their cues from Washington. Companies with above average exposure to these sectors are getting hammered, for example, Ryman Hospitality, owner of four large Gaylord conference center has seen its stock price drop over 20% since early May, and several others including Marriott cited these factors in their Q2 earnings releases.  Compounding this, a reduction in food & beverage and other ancillary spending is being noted. According to PKF, ancillary spend in 2012 vs. 2011 increased at only 0.5% on a per-occupied room basis, which is not enough to keep up with inflation, thereby dragging down hotel profits. This is most likely due to a combination of factors including reaction of guests to increased hotel room rates (which have gone up over 4% during the same period) and increased use of technology by guests which allows more optionality. This would include using the Internet to find local dining options or using tablets or smart phones to watch movies instead of renting. Hotels may also be giving away more stuff, such as complimentary breakfasts, VIP-level lounges for loyalty program members, etc. There has also been a decline in alcoholic beverage sales at banquets and other group events due to liability concerns. This is especially true during the holiday party season. December used to be a very strong month at many suburban hotels, with every weekend booked for parties from local businesses, but the tendency now is for weekday early evening events with hors d’oeuvres only, no spouses and little or no beverages provided.



Transaction volume is starting to accelerate. Jones Lang LaSalle reports first half domestic volume of $8.0 billion, up 20% compared to last year, and they are estimating total US sales of $17.5 billion for the year, which would be an increase of about 10%. Worldwide hotel asset sales are projected at $32 billion. This figure has been flat over the past two years as international markets are generally not performing as well as their US counterparts.


Some of the more significant recent transactions include:

  • Omni’s purchase and reflagging of five resorts from KSL, including the Omni Barton Creek Resort & Spa in Austin, Texas; Omni La Costa Resort and Spa in Carlsbad, Calif.; Omni Rancho Las Palmas Resort & Spa in Rancho Mirage, Calif.; The Omni Grove Park Inn in Asheville, N.C.; and The Omni Homestead Resort in Hot Springs, Va. Total price for these hotels (2,362 keys) was reportedly about $900 million ($381K per key). Omni had also announced that more deals were in the offing; so far they have added a management contract for the 301 key King Edward hotel in Toronto, and announced plans to build a 330-key hotel in Tempe (suburban Phoenix) Arizona.
  • The In Town Suites chain was sold by Kimco Realty to Starwood Capital for $735 million including the assumption of $609 million of existing mortgage debt. The chain plays in the economy/extended stay segment and has 138 properties in 21 states, with almost 18,000 total keys, so total consideration was about $41K per key. Kimco, a publicly traded REIT best known as an owner/operator of neighborhood shopping centers purchased the chain in 2007 for $781 million. Their market positioning can be summed up by this quote from their website: “Low weekly rates. No lease or credit check,” and their demographic is a couple of construction workers sharing a room.
  •  At the other end of the spectrum, New York’s tony Park Lane Hotel was sold by the Helmsley estate for $650MM (over $1 million per key) to the Witkoff Group, a local developer.
  • Thayer Lodging bought the 338-room Ritz-Carlton, San Francisco for $161 million from Host Hotels and Resorts. The acquisition is the first investment of Thayer Fund VI. Thayer intends to invest up to $17 million in the property in its first two years months of ownership, the company said.
  • Host, in turn bought the Hyatt Place on Waikiki Beach for $138 million ($325K/key)
  • Also in San Francisco, Chesapeake Lodging Trust closed a deal for the Hyatt Fisherman’s Wharf, paying a purchase fee of around $103.5 million ($331K/key) for the hotel to an affiliate of Hyatt Hotels Corp. Chesapeake also bought the Holiday Inn Santa Barbara for $61 million ($305K/key), and there were several other sales of “boutique” properties in the Bay Area.
  • RLJ was also active, purchasing the Courtyard Waikiki Beach and an independent hotel in San Francisco to be converted to a Courtyard for $75 million ($189K/key) and $30 million ($197K/key) respectively.
  • On the private equity side, Carey Watermark has closed several deals including a Holiday Inn in Manhattan for $113 million ($500K per key!), the Hutton Hotel in Nashville for $74MM ($300K/key) and a portion of the Fairmont in Sonoma County CA for $73 million. The total Sonoma transaction was valued at about $97 million or $429K/key.
  • The biggest single asset transaction of the quarter was probably Sunstone’s purchase of the 1,000+ key Boston Park Plaza hotel for $250 million.
  • A Joint Venture led by Pyramid Hotel Group purchased the 399 key Sheraton Station Square in Pittsburgh from Forest City for $61MM ($153K per key). Plans are to invest over $13 million ($33K/key) in guestroom and public area renovation. Pyramid will retain the Sheraton flag and operate the property.
  • Forest City also sold a mixed used development in downtown Pittsburgh which included the 616 key Westin hotel (which was formerly a Doubletree and before that a Vista) and a 27 story office building to Starwood Capital for $135 million.


The chart below summarizes some of the key deals over the past several months. Public company REIT’s are highlighted- as can be seen, they are on both sides of these transactions as they optimize their portfolios.



Public Company News

Financing, Mergers and Acquisitions, Executive Changes


  • Ashford Hotel Trust announced plans to split itself into two REIT’s, initially by spinning off 8 of its higher end hotels into a company called “Ashford Hotel Prime.” In conjunction with this, they had a secondary offering of 11 million shares of new stock to raise cash to effect the spin off, which is expected to occur after SEC approval later this year. BofA advised Ashford on the spin off, and BofA, Deutsche Bank and Morgan Stanley co-underwrote the stock offering.
  • It is increasingly looking like Strategic Hotels and Resorts will put itself up for sale, as has been rumored since its CEO Laurence Geller stepped down last year. It is being pressured by major shareholder Orange Capital LLC. Eastdil was reportedly hired to run the sale process. In June, several analysts valued the company in the range of $13 per share as a private concern. It has recently been trading in the $9 range (having jumped up from the $7.50-$8 area prior to the most recent activity), so either no one believes that a deal is imminent, or the $13 figure is not realistic.
  • Chatham Lodging Trust had a secondary offering of 4.5 million shares plus an exercise of about 475K shares on the overallotment, which is interestingly less than the 675K shares potentially available. The timing here appears to have been an issue as their stock dropped significantly in the weeks leading up to the secondary, going below the 200 day moving average that is beloved by chart watchers. However, the price has since recovered and is about halfway back to the peak reached earlier this year, and most analysts view it as a solid dividend performer. Barclays and UBS were the lead book runners for the offering. Separately, HG Vora Capital Management and affiliates said it has a 9.8% stake in Chatham, up from a 7% interest it reported in January, according to a press release from Chatham. In a filing with the U.S. Securities and Exchange Commission, HG Vora said it is interested in having discussions with the company about a potential privatization
  • FelCor continues to be in disposition mode, recently selling two more properties (Holiday Inn Santa Barbara and Sheraton Suites Atlanta) with the proceeds used to pay down debt. Six other properties are reportedly on the market, with contracts signed on hotels in Wilmington DE and Baton Rouge to private parties. FelCor has not purchased any hotels since acquiring three New York properties in 2011 and early 2012, but they have sold 18 properties worth over $350MM in the last two years.
  • Hyatt has reached a tentative settlement with Unite Here, a union that represents thousands of its workers in Chicago, Hawaii and California. In exchange for retroactive wage increases and locking in benefits plans for the next 5 years, the union agreed to call off its boycotts and strikes. Hyatt also announced that they made an investment of $325MM in Playa Hotels & Resorts. In return, Playa will license 13 upscale resorts in Mexico and the Caribbean under what is likely to be a new brand under the Hyatt umbrella.
  • Diamond Resorts International which operates on a vacation club model, said it expects its IPO of 15.5 million shares to be priced between $16 and $18 per shares, valuing the company at as much as $1.3 billion.    The company owns and operates 79 resorts in the US, Mexico, the Caribbean and Europe.  They expect to raise as much as $279 million in the IPO with the rest sold by shareholders.     They plan to list on the NYSE under the symbol DRII. Credit Suisse, BofA Merrill Lynch, J.P. Morgan and Guggenheim Securities are the joint bookrunners on the deal.
  • Host Hotels and Resorts elected Mary L. Baglivo to its board, increasing its size from nine to ten. Ms. Baglivo is a partner with Brand Value Advisors, a strategic brand and digital marketing advisory firm and was formerly CEO-Americas with Saatchi & Saatchi (a major ad agency).
  • Ryman Hospitality Properties, which is the REIT that was formed to hold the real estate on four very large convention properties after Gaylord Hotels sold their management operations to Marriott, repurchased about $55 million of its 3.75% convertible notes and made certain other adjustments to various outstanding warrants and options. They have been struggling lately as they have huge exposure to both the group segment and Washington DC, and have been downgraded by several analysts.
  • Supertel Hospitality Inc. was notified by NASDAQ that they may be de-listed unless they get their stock price back over $1. They have 180 days to comply. The company is a REIT that owns about 75 limited service hotels, generally economy segment brands, mostly in Midwestern and Southeastern states. They also announced the appointment of a new Chief Operating Officer, Jeffrey W. Dougan to replace the retiring Steve Gilbert.
  • Red Lion Hotels announced the retirement of CEO Jim Eliassen, who will be replaced by Board member and industry veteran Jim Evans on an interim basis. Evans was most recently the CEO of Brand USA and has also run Best Western Hotels and his own management/consulting operation (Ardent Advisors) as well as serving as CEO of Jenny Craig.




The table below summarizes Q2 2013 earnings reported by major public hospitality companies.


Company Date Reported Reported EPS* Consensus EPS* Comments
Starwood 7/25/13 $0.79 $0.73 Non-hotel (residential) sales and lower SG&A costs helped earnings. Results from outside North America still a drag. Generally tepid quarter but analysts still love them
Marriott 7/30/13 $0.57 $0.57 Results at lower end of guidance. Group is slowing, and DC has been a drag. RevPAR guidance for the rest of the year pushed down 100bp at the high end to 4.5-6%.
Host Hotels 8/2/13 $0.45 $0.42 Strong Q2 RevPAR (6%) but guidance narrowed for balance of year. Group still an issue but trending up in early 2014
LaSalle 7/17/13 $0.73 $0.73 Solid quarter especially considering DC weakness; upside from completion of NY Park Central renovation
Hersha 7/30/13 $0.14 $0.15 Softness due to slow convention calendar and preopening/fixed cost increases; outlook guarded but unchanged
Choice 7/26/13 $0.48 $0.46 Top line slowing, but unit growth picking up. New “Sky Touch” technology and focus on Cambria brand continues to suck up cash
Hyatt 7/31/13 $0.43 $0.30 Clean beat, more than makes up for disappointing Q1. Good performance from renovated hotels; banquet revenue up 20%
Wyndham 7/24/13 $0.98 $0.90 Beat mostly from vacation ownership; also helped $0.02 by share repurchase. Inter-national RevPAR (esp. China) very soft, but US met expectations.
Pebblebrook 7/26/13 $0.43 $0.41 Solid quarter helped by large West Coast presence, guidance unchanged.
Sunstone 8/5/13 $0.30 $0.30 Slightly weak quarter on RevPAR but margins improved; guidance narrowed but midpoints remain the same. Completion of renovations will help win back group. Balance sheet getting stronger; instituted first dividend in 5 years
Chesapeake 8/5/13 $0.56 $0.53 Had a strong 7.7% RevPAR in quarter but lowered top end of 2013 expectations due to weakness in government sector

*Generally excludes unusual items; figures are for FFO on REITS

Stock prices

On balance, hotel company stock prices have been keeping pace with the overall market this, gaining about 5% since June 30 and 17% since December 31.


Publicly traded hotel company stock performance (US based companies with market capitalization in excess of $1 Billion plus selected companies over $500 Million



Company Type Primary Segment (s)

Price as of





Change Since


Marriot International C-Corp Upper Upscale,Luxury, Resorts




Starwood Hotels C-Corp Upper Upscale, Luxury




Choice C-Corp Limited Service




Hyatt C-Corp Upper Upscale




Host Hotels REIT Upper Upscale, Luxury




La Salle REIT Urban boutique, Upper Upscale




Diamondrock REIT Upper Upscale, Luxury, Urban Limited Service




RLJ REIT Limited Service with some Upper Upscale




Sunstone REIT Upper Upscale




Strategic REIT Upper Upscale, Luxury




Pebblebrook REIT Upper Upscale, Luxury




Hersha REIT Urban Limited Service




Chesapeake REIT Upper Upscale




Ashford REIT Diversified-all segments




Hospitality PropertiesTrust REIT Limited Service




Dow Jones Industrial (comparison)




Nasdaq Composite (comparison)




S&P 500 (comparison)




Source: Yahoo! Finance



Other Industry News

  • Hilton announced plans to discontinue room service at some of their flagship hotels including the New York Hilton and Hilton Hawaiian Village, citing massive losses due to high labor costs (56 employees were let go in New York). They will replace it with a modified “grab-n-go” concept which would provide 24 hour in-room delivery. The jury is still out on this one. There is no question that room service is a loss leader, but it does provide some of that special touch that completes the hotel experience, especially in the upper tiers. Several competitors have stated that they have no plans to drop room service and hope to attract dissatisfied Hilton customers.
  • Marriott announced that they will cease managing the Eden Roc hotel in Miami, following a defeat in the courts that held that their “unbreakable” contract could be terminated, although the owners would still be liable for damages. Marriott also lost the management (and branding) of the Ritz Carlton in Palm Beach, following claims by the owner of mismanagement. They are appealing both decisions.
  • Penny Prtizker, a board member and daughter of the founder of the Hyatt chain, was confirmed as US Secretary of Commerce. Hotel owners and operators are hopeful that this appointment will give them more voice in government policy decisions.
  • Hoteliers also generally cheered recent Supreme Court rulings on same sex marriage, as this opens up a new revenue source, particularly in California.
  • Best Western announced that CEO and President David Kong will continue in that capacity through 2018. Kong has performed those roles since 2004 and has generally been acknowledged as having done a good job in maintaining the brand’s relevance and enhancing its image.
  • La Quinta hotels, in a move possibly related to its impending IPO, spun off 25 of its older properties to Dallas based Newcrest Image as part of its plan to divest non-core assets to raise cash to satisfy debt covenants. Most of the hotels that were sold will convert to more downscale brands such as Super 8, Motel 6, Days Inn and Quality Inn.
  • Legendary hotelier John Q. Hammons passed away at age 94. He was one of the original developers who expanded the Holiday Inn chain in the 1950’s and 60’s, and later formed his own public company that owned and operated dozens of hotels nationwide. Many of his hotels won awards and Hammons was recognized for his public service, especially in his hometown of Springfield MO. His later years were marked by controversy. Because Hammons had no children to inherit his sizeable fortune and was institutionalized with various health issues, a legal battle for control started several years ago and continues to this day.
  • The Shakopee Mdewakanton Sioux Community has signed a letter of intent to secure the development rights for a planned $105 million hotel at the Mall of America in Bloomington, Minn. The 330-room hotel is part of the mall’s larger $250 million expansion project. A deal is close to being made to have the hotel open under the JW Marriott brand.
  • Some new brands are being launched, mostly by established chains looking for new niches. These include AC Hotels by Marriott, a European import aimed for top travel markets in the select service space (the first US one is proposed as a new build in Tucson) and Virgin Hotels, an urban full service- tie in with their expanding US airline operations. Moxy Hotels, a new economy-segment, millennial-targeted brand is a JV between Marriott and Ikea which is scheduled to launch next year, starting in Europe. Commune Hotels, the parent company of San Francisco-based Joie de Vivre Hospitality is also aiming in that direction with its new “Tommie” brand that features communal dining and a “crash pad” ambiance. John Pritzker (of the Hyatt family) recently acquired the other 50% of Commune that he did not already own.
  • Morgans Hotel Group has been the target of a proxy fight and investor lawsuits looking to unlock its values is attracting bidders after announcing that it is putting itself up for sale. Reportedly as many as eight suitors have expressed interest, and although none have been publicly identified, they are said to be “international hospitality companies that are strategic acquirers.”
  • A group of hotel owners in Denver is petitioning State authorities to have them rescind a subsidy agreement for the 1,500 room Gaylord hotel and conference center proposed for nearby Aurora. They claim that changes in the ownership structure and cost estimates materially change the economic need, and they are also concerned about too much concentration of product under the Marriott umbrella; if the hotel is built, Marriott brands would control nearly half of the Denver area meeting space. Ironically, the petitioners include other Marriott franchisees as well as at least one hotel already receiving governmental assistance from the City of Denver.
  • A J.D. Power survey shows that customer satisfaction is at the highest level in seven years. Improvements were noted in reservations, check-in and check-out procedures and (except at the lower price points) overall costs and fees. Internet service remains the biggest negative. The identities of the highest-rated chains in each category have moved around a little, with Kimpton and Hyatt Place capturing top honors for the first time, joining perennial champions Ritz-Carlton, Holiday Inn and Drury Inns.
  • Four Seasons Hotels and Resorts has appointed Allen Smith, currently CEO of Prudential Real Estate Investors, as its new president and CEO—who, although a Cornell University School of Hotel Administration graduate, has never worked for a hotel company.




US Economy General Statistics


Once again, the numbers are showing mixed results. Consumer confidence and retail sales of big-ticket items are up and the housing market remains strong in the face of rising mortgage rates. However, employment statistics are barely keeping pace and rising energy and food prices are concerns, and as noted above, the stock market has slowed a bit from its torrid growth earlier this year.




GDP Q2 2013 Increased at annual rate of 1.7% ; Q1 of 2013 revised to 1.1% (vs. 2.5%).  Positive drivers were consumer expenditures, construction and inventory growth, which were offset by decreases in government spending. The bulk of the Q1 change was due to a downward revision in Federal government spending.
ConsumerConfidence July-13 The University of Michigan Consumer Sentiment Index increased to 85.1 in July, reaching a six year high, reportedly fueled by positive job growth trends, which seems counter to the actual employment data being reported (see below). Other consumer confidence indices also reached levels not seen since the start of the recession.
Unemployment July-13 The unemployment rate edged down to 7.4%, with the creation of 162,000 new jobs. Although job creation has maintained a steady pace, it is still not enough to offset lower labor force participation, and the jobs created continue to be mostly in the lower paying, part time segments such as restaurants and retail. Average hours worked and average hourly earnings both posted slight declines for the month.
CPI June-13 CPI increased 0.5% in March, and the annual rate of increase is 1.8%. Most of the increase was due to rising gasoline prices; if food and energy were excluded there would have been an 0.2% increase. Except for the extremely volatile energy sector, trends have remained relatively stable although there are also signs of increases in several key food items.
Retail Sales June-13 Up 0.4% for the month and up 5.7% vs. year ago. Big gainers included automobile sales and home improvement/construction products. Internet sales are also increasing at a much faster rate than brick-and-mortar establishments.
Housing June-13 New home sales were at a seasonally adjusted annual rate of 497K units, up 8.3% from the previous month and up a whopping 38.1% vs. June 2012. Sales of existing homes dropped 1.2% in June but remain 15.2% above March 2012. Low inventory levels have affected sales over the past few months. Prices were up 13.5%, and have now increased for 16 consecutive months. Gains continue to be strongest in the West (nearly 20%) and South; Eastern home prices are only up 7%.A further sign of strength is that the proportion of sales classified as “distressed” (foreclosures and short sales) is now at 15%, or about half of year-ago levels and the lowest since that measure was instituted in 2008. Tempering this is an increase of about 50bps in average mortgage rates in the past month, which are now at the highest levels in nearly 2 years.

Sources: National Bureau of Economic Research; various government agencies including US Department of Commerce