Money Talk Podcast, Friday Sept. 1, 2017
Landaas & Company newsletter September edition now available.
Advisors on This Week’s Show
(with Max Hoelzl)
Week in Review (Aug. 28 – Sept. 1, 2017)
Significant economic indicators & reports
No major announcements or releases
Tight U.S. housing conditions continued to keep home prices rising much faster than inflation overall in June. The S&P/Case-Shiller home price index stayed at 5.7% year-to-year growth for the 20-city composite index. A housing economist for Standard & Poor’s noted that both the number of houses for sale and their time on the market have been declining for four or five years. So far, low mortgage rates and rising wages have kept housing affordable enough that no turnaround in the trend appears imminent.
The Conference Board said its consumer confidence index advanced again in August, with sentiments toward current conditions hovering near a 16-year high. Expectations for coming months stayed relatively flat, the business research group said, suggesting that consumers are not anticipating a faster pace in economic growth.
The U.S. economy grew at a 3% annual rate in the second quarter, its fastest pace in more than two years. The 3% annual growth rate in gross domestic product was up from a previous estimate of 2.6%, the Bureau of Economic Analysis reported. Consumer spending – responsible for about 70% of GDP growth – led the revision, increasing to a 3.3% gain from a previously estimated 2.8%. The Federal Reserve’s favorite measure of inflation suggested the economy still is not accelerating fast enough to raise fears of runaway prices. The core PCE Index rose 1.5% year-to-year, the lowest inflation in six quarters.
The moving four-week average for initial unemployment claims fell for the fifth week in a row and the sixth time in seven weeks, nearing a 44-year low. Job losses remained 34% beneath the 50-average, according to Labor Department data, indicating an extended reluctance by employers to let go of their workers.
Consumers contributed more to economic growth in July than they have since April, the Bureau of Economic Analysis reported. Consumer spending grew by 0.3%, just below the 0.4% gain for personal income in the month. The personal saving rate dipped to 3.5% of disposable income, the lowest since December. The report hinted at a long-awaited rise in wage income with a 0.5% gain for the second month in a row. The Fed’s preferred inflation gauge dropped to 1.4% year-to-year, the lowest since December 2015.
The National Association of Realtors blamed “staggering inventory woes” for the fourth decline in five months of pending home sales. The trade group said July contracts also were down 1.3% from July 2016, the third year-to-year setback in the last four months. An economist for the association estimated that median house prices have risen 38% in the last five years, more than triple the increase in average hourly earnings in that period. The effect, he said, is that more Americans who want to buy a house can’t afford what’s available. The Realtors have downgraded their sales forecast for 2017 to 5.49 million houses, 0.7% higher than in 2016.
Employers added 156,000 jobs in August, less than expected and a step back from the average monthly gains of 176,000 so far this year and 187,000 in 2016. 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 July. The unemployment rate rose to 4.4% from 4.3%, its lowest level since 2001. Compared to a year ago, 128,000 fewer workers reported being too discouraged to look for a job, a decline of 22%.
The annual rate of construction spending declined 0.6% in July, although the pace still was 1.8% faster than the year before. The Commerce Department reported that residential construction, accounting 43% of total spending, was one of the few categories where expenditures rose for the month. Government construction spending fell 1.4% for the month and 5.6% for the 12 months.
The manufacturing index of the Institute for Supply Management increased in May and signaled expansion for the 12th month in a row. Although growth in orders slowed slightly, 14 of 18 industries surveyed said they were expanding. Based on ISM research, the latest report suggests the U.S. GDP is growing at a 4.9% annual pace.
American consumer sentiment declined in August from its mid-month level but still rose from where it registered in July and a year ago. The University of Michigan said attitudes toward current conditions fell slightly, and expectations for coming months rose based on feelings about personal financial situations. Through the first eight months of 2017, sentiment overall has been at its highest level since 2000, at the peak of the longest U.S. economic expansion.
Where the Markets Closed for the Week
- Nasdaq – 6,435, up 169 points or 2.7%
- Standard & Poor’s 500 – 2,477, up 34 points or 1.4%
- Dow Jones Industrial – 21,988, up 174 points or 0.8%
- 10-year U.S. Treasury Note – 2.16%, down 0.1 point