Money Talk Podcast, Friday Aug. 3, 2018
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Advisors on This Week’s Show
(with Max Hoelzl)
Week in Review (July 30-Aug. 3, 2018)
SIGNIFICANT ECONOMIC INDICATORS & REPORTS
The Pending Home Sales Index rose 0.9% in June, following the May decline of 0.5%. The index was down 3% from year-ago levels for the sixth straight month. The chief economist for the National Association of Realtors said a slight uptick in inventory helped counter higher interest rates and prices. However, inventory was still subpar and not meeting demand, pricing out would-be homebuyers. The trade group lowered its full-year forecast for existing home sales to 5.46 million houses, down from actual sales of 5.51 million in 2017.
The Bureau of Economic Analysis said both personal spending and personal income rose 0.4% in June. As a result, the personal saving rate stayed at 6.8% of disposable income. The Federal Reserve Board’s preferred measure of inflation – the PCE price index excluding food and energy – rose 1.9%, unchanged from May. Staying below the Fed target of 2%, the rate allows the Fed to continue its gradual raising of short-term interest rates.
The 12-month increase in the 20-city composite portion of the S&P CoreLogic Case-Shiller home price index was 6.5% in May, down from the April pace of 6.7%. A housing economist for S&P said price rises have been consistent and widespread, though they may have peaked in November. He said the combination of rising home prices and rising mortgage rates are beginning to affect the housing market.
The Conference Board reported that July’s consumer confidence index increased marginally to 127.4 after a modest decline in June. Consumers’ assessment of current conditions rose slightly, signifying economic growth is still strong. However, back-to-back declines in expectations suggest consumers don’t see growth accelerating.
The Commerce Department reported that construction spending for June was 1.1% below May’s record pace of $1.317 trillion. The June 2018 figure was 6.1% higher than the year-ago pace of $1.241 trillion. Residential construction spending fell by 0.5% from May but rose 6.5% from the year-before rate. Total construction spending has surpassed the pre-recession peak for nearly two years despite the public sector, which has remained mostly flat since the recession.
The Institute for Supply Management’s manufacturing index decreased in July to 58.1 compared to June’s reading of 60.2. The index reading above 50 indicated expansion for the sector for the 23rd consecutive month. New orders and production had slower growth following high levels in June, but employment continued to grow in spite of labor and material shortages. Of 18 manufacturing industries surveyed, only primary metals wasn’t expanding. According to the Institute for Supply Management, the manufacturing index suggests GDP grew in July at a 4.6% annual rate.
U.S. sales of motor vehicles declined in July to the lowest rate in 11 months. Dealers sold the annual equivalent of 16.8 million vehicles, down 2.7% from June and down 0.1% from the year before. According to Autodata Corp., year-to-year car sales declined 14.2% and truck sales rose 8.2%, including a 24.3% rise for imported trucks. Trucks accounted for 68% of sales in July, vs. 63% in July 2017. In total, vehicles make up about one-fifth of retail sales, which should dampen the retail report for July.
The four-week moving average for initial claims for unemployment insurance was down for the fourth week in a row. It’s near the lowest level since late 1969. According to Labor Department data, job losses remained 40% below the 51-year average, demonstrating employers’ reluctance to let workers go and the tightness of the labor market.
The Commerce Department reported that factory orders rose 0.7% in June, making it the second month in a row of increases, boosted by strong demand for transportation and electrical equipment. Orders were 8% above year-ago levels. Excluding the volatile transportation equipment category, new orders increased 7.8% from June 2017. Orders for non-defense capital goods excluding aircraft rose 6.7% from the same time last year, suggesting a continued lag in business investments.
U.S. employers added 157,000 jobs in July, below analyst expectations and lower than the 12-month average but offset by revised estimates showing 59,000 more jobs added in May and June. The Bureau of Labor Statistics said the unemployment rate dipped to 3.9% from 4% in June, as fewer sidelined workers re-entered the labor market. The average hourly wage rose 2.7% from July 2017, unchanged from June, indicating a relative lack of pressure for inflation, despite the tight labor market.
The U.S. trade deficit widened in June, increasing 7.3% to $46.3 billion. It was the first time in four months that the deficit expanded, with exports declining 0.7% from an all-time record in May and imports rising 0.6%. The U.S. dollar’s strength against other major currencies has meant that U.S. exports will cost more abroad, while imports seem cheaper to U.S. consumers.
The Institute for Supply Management reported a slip in its non-manufacturing index in July, although the economy’s leading sector continued to expand for the 102nd month in a row. The trade group said most measures suggested growth was slowing and that the index reading corresponded with a 2.5% annual increase in gross domestic product.
Where the Markets Closed for the Week
- Nasdaq – 7,812, up 75 points or 1.0%
- Standard & Poor’s 500 – 2,840, up 21 points or 0.8%
- 10-year U.S. Treasury Note – 2.95%, down 0.01 point
- Dow Jones Industrial– 25,462, up 11 points or 0.0%
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