WSU Current Conditions & Leading Economic Indicators Indices
At the end of 2010, the WSU Current Conditions Index was 85.5, the lowest it has been since the Index's inception in 2002. Fortunately, the Index started 2011 on an upward trend that lasted through the first six months of this year. From December to June, the Index grew 2.9 percent. However, the average Index value for the first half of 2011 was 0.2 percent lower than the average value in the first half of 2010. That decline was due, in part, to two declining indicators: the seasonally adjusted number of home sales that decreased 18.7 percent and the seasonally adjusted volume of outbound airfreight shipments at Wichita's Mid-Continent Airport, which decreased 3.9 percent. Moderating the Index's decline were the seasonally adjusted unemployment rate, which decreased from 8.7 to 8 percent, and the seasonally adjusted hotel occupancy rate that increased 3.5 percentage points.
Fourteen of the 15 months ending in June, the WSU Leading Economic Indicators Index increased, for a total gain of 13.8 percent. Only one of the nine Index indicators showed deterioration from the first half of 2010 to the first half of 2011. That was the inflation-adjusted value of residential building permits in Wichita, which declined 21.8 percent. Particularly encouraging was a 16.6 percent drop in the number of Kansas initial unemployment claims. This Index is used to forecast economic conditions six months into the future. With the steady monthly increases we have observed for more than a year, it seems reasonable to be optimistic about the rest of 2011 and the beginning of 2012.
Consumer Confidence, Income and Spending
The average national Index of Consumer Confidence increased 9.3 Index points from the first half of 2010 to the first half of 2011. However, with a summer characterized by a volatile stock market, political unrest, rising consumer prices, and drought conditions, the Index of Consumer Confidence dropped 14.7 points in August, while the Index of Consumer Expectations dropped 23 points. It's difficult to know if these declines were based primarily on actual economic conditions or were the result of discouraged consumers feeling overwhelmed by negative news and economic uncertainty.
From 2005 to 2009 per capita personal income grew 14.6 percent in Wichita, with 2006 being an outstanding year of 10.6 percent PCPI growth, easily exceeding the inflation rate of 3.2 percent. Two other years, 2005 and 2008, per capita personal income again increased at a higher rate than inflation. However, that did not happen in 2007 and 2009. In fact PCPI decreased 3.3 percent in 2009. Despite the decline, that was the only year from 2005 through 2009 when Wichita's PCPI exceeded the U.S. level, although only slightly.
The decrease in Wichita's personal income in 2009 took its toll on consumer spending. Nominal taxable retail sales declined 5.5 percent in 2009 and 0.2 percent in 2010. First quarter 2011 data indicates that consumer spending may be rebounding. Nominal taxable retail sales increased 3.5 percent from first quarter 2010 to first quarter 2011. However, events have occurred since first quarter that may discourage consumers - volatility in the stock market, rising food prices, announcements of government austerity programs and rising health care costs. Because of these events and continued economic uncertainty, retail sales are estimated to decrease 1.1 percent in 2011, followed by a 3.8 percent increase in 2012.