Economy Watch: Service Sector Wheezes a Little in June
- Jul 07, 2010
July 7, 2010
By Dees Stribling, Contributing Editor
The jury is still out on double-dip, but the Institute for Supply Management did report a slight weakening of the services sector in June. Not a contraction, but a slower pace of growth, with ISM service index dropping to 53.8 from 55.4 in May .
Still, anything above 50 means expansion for the services section, which is most of the economy, and the current reading is much higher than in November 2008, when it was 37.2. In 2004, however, the index reached a high point for the last decade at 67.7.
The employment component of the services index, measuring jobs such as those in restaurants, shops, schools, construction sites, banks and hospitals, fell to 49.7 in June from 50.4 in May. The new orders component, which is a forward-looking indicator measuring the strength of demand, fell from 57.1 in May to 54.4 in June.
CRE Valuations Edge Up: Green Street
The Green Street Advisors Commercial Property Price Index rose by 1 percent in June according to the Newport Beach, Calif. consultancy on Tuesday. U.S. commercial property values have now risen a little more than 20 percent since hitting a trough in May 2009, but they remain about 25 percent below the 2007 bubble peak.
“The rebound in pricing that began in earnest last fall has become more vigorous in recent months,” Mike Kirby, Green Street’s Director of Research, said in a statement. Sellers are feeling less pressure to act, the outlook for fundamentals has improved, well-capitalized buyers are plentiful, financing markets are recovering, and return requirements across capital markets have come down.”
Kirby added that prices have now roughly returned to early-2005 levels. No one is serious expecting another climb up to 2006 and 2007 heights, however.
FHFA Pulls the Plug on PACE
The Federal Housing Finance Agency, which oversees mortgage finance giants Fannie Mae and Freddie Mac, has nixed a program called the Property Assessed Clean Energy. The program encourages homeowners to add debt to their property to invest in making it more energy efficient, and pay the debt back as an addition to their property tax bill. The additional debt is a senior lien with priority over the regular mortgage.
Fannie Mae and Freddie Mac, who know something about failed financial structures, called PACE a financially dodgy way to promote energy efficiency and both vetoed the program. The FHFA agreed with that assessment on Tuesday.
California officials are particularly upset about this stance, since their state has participated in PACE more than any other. The U.S. Department of Energy has awarded $150 million to finance PACE (the money is part of the federal stimulus), but last week Energy told state and local governments not to use the money that way.
Wall Street bounced around in positive territory most of the day on Tuesday, then dropped negative, but recovered a little at the end. The Dow Jones Industrial Average gained 57.14 points, or 0.59 percent, while the S&P 500 and the Nasdaq were up 0.54 percent and 0.1 percent, respectively.