Money Talk Podcast, Friday Aug. 1, 2014
Advisors on This Week’s ShowMax Hoelzl and Joel Dresang)
Week in Review (July 28-Aug. 1, 2014)
Significant economic indicators & reports
In a sign of rocky roads in the housing recovery, the National Association of Realtors said its pending home sales index slipped 1.1% in June, which was even more than analysts anticipated. An economist for the trade group said the housing market was settling down with more houses to sell and moderate increases in prices, but he expressed concerns about tight lending practices and suppressed wages. Compared to a year ago, the index dropped 7.3%.
The S&P/Case-Shiller Home Price Index showed home prices increased at an annual rate of 9.3% in May, the sixth consecutive deceleration since peaking at 13.7% in November. A housing economist for S&P cited mixed signals from the housing industry, with particular lags for the building and sales of new houses.
Considered a harbinger of greater spending, consumer confidence, rose in June to its highest point since October 2007. Recent employment growth has helped raise expectations for the economy, jobs and – to a lesser degree – wages, the Conference Board said. An economist for the business research group said the index suggested continued momentum for economic growth.
The U.S. economy, measured by the gross domestic product, grew at 4% annual pace in the second quarter, much faster than expected and the highest pace in three quarters, according to preliminary estimates from the Bureau of Economic Analysis. Consumer spending, which drives about 70% of economic growth, also rose faster than anticipated, led by the largest increase in durable goods spending since the recovery began five years ago.
The four-week moving average of initial unemployment claims dipped for the fourth week in a row and reached its lowest level since March 2006. Jobless claims have been staying below the historical average for the last 19 months, suggesting a reluctance by employers to let workers go.
Employers added fewer jobs than expected in July but 15,000 more in the last two months than previously estimated, the Bureau of Labor Statistics reported. The unemployment rate rose to 6.2% from the June rate of 6.1% – the lowest in six years. But the rate rose because more than 300,000 additional job seekers entered the labor force – presumably encouraged by improving prospects.
American consumers spent 0.4% more in June than in May, keeping up with a 0.4% gain in personal income, according to the Bureau of Economic Analysis. Both figures match the 30-year average gain. The personal saving rate stayed at 5.3% of disposable income. The report included a key inflation measure, which rose 1.5% from June 2013 – short of the 2% range preferred by the Federal Reserve.
The Institute for Supply Management said its manufacturing index in July grew to its highest mark since April 2011, signaling 14 months straight of manufacturing expansion. New orders, employment and production components all accelerated from their pace in June.
The Commerce Department reported that construction spending declined 1.8% in June, surprising analysts, who were expecting a slight gain. The drop was led by a 4% decrease in public construction spending. Overall, building projects still rose 5.5% from the year before.
Where the Markets Closed for the Week
- Nasdaq – 4,353, down 97 points or 2.2%
- Standard & Poor’s 500 – 1,925, down 53 points or 2.7%
- 10-year U.S. Treasury Note – 2.5%, up 0.03 point
- Dow Jones Industrial – 16,493, down 468 points or 2.8%