Money Talk Podcast, Friday July 29, 2016
Landaas & Company newsletter August edition now available.
Advisors on This Week’s ShowMax Hoelzl and Joel Dresang)
Week in Review (July 25-29, 2016)
Significant economic indicators & reports
No major releases
The bumpy housing recovery kept bouncing along as new home sales in June rose to their highest level since early 2008. The Commerce Department reported that the supply of new houses for sale remains relatively low, based on the sales pace. Existing home sales generally outnumber new homes by about 10-to-1, but the new houses help make room for further housing growth.
Another sign of the housing market recovery showed up in May house prices. The S&P CoreLogic Case-Shiller index reported a lower-than-expected 5.2% increase in year-to-year prices. In the 20-city composite, eight had higher price gains than in April. Although expectations of price increases are slowing, further sales of existing houses and construction of new ones should keep the recovery going, according to an S&P economist.
A leading indicator of consumer spending, consumer confidence dipped in July but less than analysts had expected. The Conference Board said consumers’ already-high assessment of current conditions improved while expectations of near-term prospects declined slightly. The business research group said its index suggests continued moderate economic growth.
The Commerce Department reported that durable goods orders declined in June for the second month in a row. Slower global economic growth and effects from a strong dollar and cheap oil have hampered demand for U.S. manufactured goods. Non-defense capital goods orders excluding aircraft – a proxy for business investment – rose slightly from May but were down 3.8% from June 2015.
The Federal Reserve’s policy-making group announced that it would keep short-term interest rates low but that evidence suggests continued moderate expansion of the U.S. economy. The Federal Open Market Committee cited a stronger labor market and improved consumer spending for ongoing economic growth, despite weak contributions from business investments. In part because of past declines in energy prices, the committee expects inflation to stay low awhile, and it plans to eventually raise rates but only gradually.
The moving four-week average for initial unemployment claims sank to its lowest level since December 1973 as employers remain reluctant to let workers go. Labor Department data show jobless applications below the 49-year average level every week since early 2013.
Economic growth picked up in the second quarter, though much less than analysts expected. The annual pace of Gross Domestic Product expansion was 1.2%, according to the Bureau of Economic Analysis. That’s up from a 0.8% rate in the first quarter, which was lower than initially reported. Consumer spending, which drives more than two-thirds of economic activity, rallied to a 4.2% rate in April through June, and exports benefited from a slightly weaker dollar. Slower inventories held back second-quarter growth, but could set the stage for stronger numbers as demand revives. The Fed Reserve’s favorite inflation gauge remained at 1.6%, staying below the 2% mark preferred by the central bank.
Considered a leading indicator of consumer spending, The University Michigan consumer sentiment index declined slightly in July. The index dropped to a reading of 90 from 93.5 in June but had risen from a mid-month estimate. A university economist suggested consumers generally benefit from strong personal finances and low interest rates, but upper-income households are still concerned about the British vote to leave the European Union. Based on the index, the economist said, consumer spending still should rise about 2.6% for 2016.
Where the Markets Closed for the Week
- Nasdaq – 5,162, up 62 points or 1.2%
- Standard & Poor’s 500 – 2,174, down 1 point or 0%
- 10-year U.S. Treasury Note – 1.46%, down 0.11 point
- Dow Jones Industrial – 18,432, down 139 points or 0.7%