Money Talk Podcast, Friday June 2, 2017
Landaas & Company newsletter June edition now available.
Advisors on This Week’s Show
(with Max Hoelzl and Joel Dresang)
Week in Review (May 29-June 2, 2017)
Significant economic indicators & reports
Markets and government offices closed to observe Memorial Day.
Consumers contributed more to economic growth in April than they have in four months, the Bureau of Economic Analysis reported. Consumer spending grew by 0.4%, matching the gain for personal income in the month, which kept the personal saving rate at 5.3% of disposable income for the third month in a row. The report included a revision of March consumer spending, which rose 0.3%, up from an initial estimate of no change. Economists are waiting for consumer spending to start catching up to relatively high readings of consumer sentiment. Consumer spending drives about 70% of economic growth. The same report showed inflation remains below the Federal Reserve target of 2%.
The U.S. housing expansion continued in March with the S&P/Case-Shiller home price index more than doubling the broad inflation rate. For the 20-city composite index, prices increased 5.9% since March 2016. A housing economist for Standard & Poor’s cited limited inventory as the chief driver for the price gains and added that there’s no telling at what point high prices and rising mortgage rates will slow demand.
The Conference Board said its consumer confidence index showed slightly less optimism toward the economy in May, the second consecutive decline after index hit a 16-year high in February. Confidence has been relatively elevated for six months in a row, and the business research group said its latest surveys suggest continued economic growth at least into the summer.
Low housing inventories helped slow the rate of pending home sales in April, according to an index from the National Association of Realtors. Including a revised lowering of the index in March, the measure now has declined two months in a row and is down 3.3% from April 2016 for its first year-to-year setback in 15 months. The trade group said the supply of houses for sale is down 9% from a year ago and new construction is not keeping pace with demand. Even so, the association expects to sell 5.6 million houses in 2017, which would be 3.5% more than in 2016.
The moving four-week average for initial unemployment claims rose for the first time in three weeks, though remaining near 44-year lows. Job losses remained 33% beneath the 50-average, according to Labor Department data, indicating an extended reluctance by employers to let go of their workers.
The annual rate of construction spending declined in April, following a March pace that was the highest since before the recession. Although down 1.8% from March, spending was 6.7% above the pace in April 2016 and remained higher than the level before the 2008 financial collapse. The Commerce Department reported that residential construction spending rose 15.6% from a year ago, led by multi-family housing.
The manufacturing index of the Institute for Supply Management increased in May and signaled expansion for the ninth month in a row. Growth in production and exports slowed from April, and 15 of 18 industries surveyed said they were expanding. Based on ISM research, the latest report suggests the U.S. economy is growing at a 3.7% annual pace.
The automotive industry, a component of manufacturing closely tied to consumer spending, had a slower pace of motor vehicle sales in May. At an annual sales rate of 16.7 million vehicles, car dealers experienced their fourth decline in sales in five months. According to Auto Data Corp., truck sales continued to outpace cars because of lower gas costs; imports outpaced domestics because of the stronger dollar.
Employers added 138,000 jobs in May, much less than expected and a step back from the three-month (121,000) and 12-month (181,000) averages. Data from the Bureau of Labor Statistics showed payroll counts slowing while average hourly wages rose at an annual rate of 2.5%, unchanged from April. The unemployment rate dipped to 4.3%, its lowest level since 2001, but economists accounted much of the decline on fewer workers in the labor pool, which suggests slack in the employment market.
The U.S. trade deficit widened 5.1% in April. Exports declined 0.3% from March while imports increased 0.8%, according to the Bureau of Economic Analysis, suggesting gains in spending by U.S. consumers but continued weakness in global demand for U.S. goods.
Where the Markets Closed for the Week
- Nasdaq – 6,306, up 96 points or 1.5%
- Standard & Poor’s 500 – 2,439, up 23 points or 1%
- 10-year U.S. Treasury Note – 2.16%, down 0.09 point
- Dow Jones Industrial – 21,202, up 121 points or 0.6%