Monday, August 01, 2016

Tuesday: Personal Income & Outlays, July Auto Sales

by Bill McBride on 8/01/2016 06:37:00 PM

Tuesday:
• At 8:30 AM ET: Personal Income and Outlays for June. The consensus is for a 0.3% increase in personal income, and for a 0.3% increase in personal spending. And for the Core PCE price index to increase 0.1%.

• All day: Light vehicle sales for July. The consensus is for light vehicle sales to increase to 17.3 million SAAR in July, from 16.6 million in June (Seasonally Adjusted Annual Rate).

From Jack Corgel at HotelNewsNow.com: Why oversupply won’t end the current cycle

A common question we hear at CBRE Hotels’ Americas Research is “When will the current up cycle end?” Some inquisitive types go so far as to ask, “How will it end?”

At the “end” of the past two up cycle phases, the peak rapidly dropped into a deep trough precipitated by tragic and disruptive shocks (i.e., 9/11, financial crisis) that made people hesitant to travel. In the absence of catastrophic events, hotel demand usually falls victim to the natural death of the up cycle. After all, as I have heard some exclaim, this current expansion phase has lasted more than 27 quarters—from Q3 2009 to Q2 2016—so it is likely that a recession is near given that certain past up cycles were either shorter—such as Q1 1975 to Q1 1980—or slightly longer than this recovery, like Q4 1982 to Q3 1990.

Another down cycle might occur as the result of overbuilding, spreading hotel demand thinly enough to cause financial distress and all the unpleasantness that goes along with it. But in this article, I provide three reasons why excessive supply growth is unlikely to produce financial distress in most hotel markets across the U.S. From my current vantage point, a Goldilocks supply scenario is likely to occur over the next few years in most cities: not too many and not too few hotel rooms will come on board.
Corgel argues there isn't overbuilding this time for several reasons (slow start to adding capacity, tighter lending standards, high construction costs, etc). I haven't thought about how this cycle will end (Hopefully not a major shock).