Money Talk Podcast, Friday Aug. 28, 2015
Landaas & Company newsletter September edition now available.
Advisors on This Week’s ShowMax Hoelzl and Joel Dresang)
Week in Review (August 24-28, 2015)
Significant economic indicators & reports
No major reports released.
The annual rate of new home sales rose less than analysts expected in July, although they rebounded 5.4% from the pace in June and were up 26% from July 2014. The Commerce Department reported a rate of 501,000 houses sold in July, level with the pace set before the financial crisis, though still shy of the long-term average of 655,000. The supply of new houses for sale was down 15% from the same time last year.
U.S. home prices also lagged analyst expectations for June, but year-to-year gains remained at 5%, according to the S&P/Case-Shiller Home Price Index. A housing economist with S&P noted that housing prices continue to outpace overall inflation and pointed to recent data on housing starts and residential as signs that housing will deliver an additional boost to the U.S. economy that should not be damaged by the stock market correction.
Americans exceeded expectations with greater optimism for the economy, according to the Conference Board’s consumer confidence index for August. The indicator rose in particular because of improved attitudes toward current conditions, boosted by feelings about the job market. Near-term outlooks also rose, despite subdued prospects for personal income.
The Commerce Department reported encouraging durable goods orders in July for the second month in a row, led by demand for cars and trucks. Even excluding the volatile transportation equipment category, orders showed broad strength after months of export headwinds from the strong U.S. dollar. Also for the second month in a row, the report indicated more robust investments from businesses.
Another sign that housing’s contribution to U.S. economic growth continues came from the National Association of Realtors, which reported that pending sales of houses advanced slightly in July for the sixth gain in seven months. An economist for the trade group said a lack of supply of affordable houses is holding back sales, adding that uncertainty in the stock market would have a mixed effect on residential real estate but could help stabilize low mortgage rates.
The economy expanded at an annual rate of 3.7% in the second quarter, much stronger than earlier estimated and up from a 0.6% gain in the first three months of the year, the Bureau of Economic Affairs reported. The Gross Domestic Product benefited from more business investments and greater inventory building than previously estimated. Personal consumption, the main driver of economic growth, rose at an annual rate of 3.1%, higher than previously reported. The Federal Reserve’s preferred measure of inflation grew at a healthier rate of 1.8% in the previous 12 months, excluding volatile food and energy prices.
The moving four-week average for initial unemployment claims rose for the second week in a row after hitting a 15-year low. Claims have been running below the long-term average since early 2013, according to Labor Department data, suggesting employers continue to be reluctant to lose workers.
Consumer spending rose 3.2% in the 12 months ended in July, another sign that the U.S. economy continues to make moderate advances. A report by the Bureau of Economic Analysis shows spending only slightly lagging income for the month, which fattened the personal savings rate to 4.9% of disposable income, suggesting that consumers are increasing their potential for even greater spending. The Fed’s favorite measure of inflation increased by 1.2% from July 2014, excluding food and energy, meaning policy makers have less pressure to raise interest rates anytime soon.
Although remaining somewhat buoyed, consumer sentiment declined in August, according to University of Michigan. Researchers said consumers appear to be in a similar frame of mind as when the stock market crashed in October 1987 and Americans distanced the events on Wall Street from their workaday concerns. An economist with the survey said current sentiment suggests consumer spending will grow 2.9% in 2015 and 3% in 2016.
Where the Markets Closed for the Week
- Nasdaq – 4,828, up 122 points or 2.6%
- Standard & Poor’s 500 – 1,989, up 18 points or 0.9%
- 10-year U.S. Treasury Note – 2.19%, up 0.14 point
- Dow Jones Industrial – 16,643, up 183 points or 1.1%