Money Talk Podcast, Friday Oct. 3, 2014
Landaas & Company newsletter October edition now available.
Advisors on This Week’s ShowMax Hoelzl and Joel Dresang)
Week in Review (Sept. 29-Oct. 3, 2013)
Significant economic indicators & reports
Personal spending, the chief driver of the U.S. economy, grew 0.5% in August, the Bureau of Economic Analysis reported. Spending outpaced income, which rose 0.3%. On a year-to-year basis, spending and income both rose 4.1% in August. The personal saving rate dropped slightly to 5.4% of disposable income. A key inflation measure watched by the Federal Reserve showed a 12-month rate of 1.5%, down from 1.6% in July and below the Fed target of 2%.
Manufacturing expanded less than expected in September, slowing from its three-year high in August, according to the Institute for Supply Management. The pace of industry growth remained above the 12-month average, and purchasing managers surveyed expressed a positive outlook with some concerns for geopolitical tensions and reported labor shortages.
Year-to-year, house prices increased 6.7% in July, based on the S&P/Case-Shiller home price index. That was lower than analysts expected and marked the eighth month in a row that price gains have narrowed. Still, housing costs are rising far faster than inflation overall and have recovered back to their level early in 2008.
Consumer confidence retreated in September after hitting a seven-year high in August, according to the Conference Board. Considered a gauge of future spending, the research group’s index suffered its first decline in five months. Opinions on current conditions and outlooks for the next six months fell slightly.
The Commerce Department said construction spending fell 0.8% in August after climbing 1.2% in July. Commercial construction led the declines, but public spending also fell. Residential building slipped but mostly because of a drop in spending on home improvements.
Auto dealers sold an annualized rate of 16.4 million vehicles in September, according to Auto Data Corp. That was 6.3% off from August, which was the briskest pace since 2006. Compared to 12 months earlier, September’s sales rate rose 6.6%, led by domestic trucks.
In another sign that manufacturing growth is slowing, Commerce reported that factory orders fell 10.1% in August, the first decline in three months. But most of the setback was because of an extraordinary order for aircraft in July. Excluding volatile transportation manufacturing, orders dropped only 0.1%, with increased requests by businesses for capital equipment.
The Labor Department said the moving four-week average for initial unemployment claims dropped for the third week in a row, reaching its lowest point since hitting an eight-year low in August. A leading indicator of unemployment, the average has stayed below the 47-year average for 21 months.
Manufacturing growth has been important to the recovery and current expansion of the U.S. economy, but non-manufacturing businesses are a bigger sector. Their activity grew for the 56th consecutive month in September. The Institute for Supply Management said the sector employing 90% of the nation’s workers slowed down from a record high in August.
American employers added more jobs than expected in September, at a higher rate than the 12-month average, and they hired 69,000 more workers in July and August than previously estimated. The Bureau of Labor Statistics said staffing agencies, construction companies and restaurants were among the places expanding payroll. The average hourly wage went up a penny, suggesting pay won’t be pushing inflation higher anytime soon. The unemployment rate fell below 6% for the first time since July 2008.
The U.S. trade deficit fell to $40.1 billion in August, its narrowest gap in seven months, as exports grew 0.2% while imports rose 0.1%. The Bureau of Economic Analysis said the country’s petroleum deficit dipped nearly 10% to $13.1 billion, the lowest point since 2004.
Where the Markets Closed for the Week
- Nasdaq – 4,476, down 36 points or 0.8%
- Standard & Poor’s 500 – 1,968, down 15 points or 0.8%
- 10-year U.S. Treasury Note – 2.45%, down 0.08 point
- Dow Jones Industrial – 17,008, down 105 points or 0.6%