Money Talk Podcast, Friday Sept. 2, 2016
Landaas & Company newsletter September edition now available.
Advisors on This Week’s ShowMax Hoelzl and Joel Dresang)
Week in Review (Aug. 29-Sept. 2, 2016)
Significant economic indicators & reports
Consumers continued to appear as a bright spot in economic growth in July. The Bureau of Economic Analysis reported that consumer spending grew by 3% from the year before, the most in 10 months. Personal income rose 0.4% in July, including a healthy boost of 0.5% in wages for the second month in a row. The savings rate rose to 5.7% of disposable income from 5.5% in June. The same report showed inflation remains below the Federal Reserve target of 2%.
The U.S. housing recovery continued in June with the S&P CoreLogic Case-Shiller home price index registering a 5.1% gain from June 2015. The 20-city composite index reached 42% above its 2012 trough and came within 8% of the 2006 peak. A housing economist for Standard & Poor’s noted that housing prices have been rising consistently for two years without showing signs of slowing.
The Conference Board said its August consumer confidence survey indicated the strongest optimism toward the economy in almost a year. Consumers account for more than two-thirds of the U.S. gross domestic product, and an economist for the business research group said current levels of confidence suggest a possible increase in economic growth rates in coming months.
Another sign of the continuing housing recovery: Higher-than-expected pending home sales in July. The National Association of Realtors said its index rose to its second-highest point in more than 10 years – second to its reading in April. The trade group forecasts a 2.8% rise in sales of existing houses this year, which would amount to nearly 5.4 million, the highest since 2006.
The annual rate of construction spending remained steady in July and near the all-time peak set in 2006. Spending rose 1.5% above the pace in July 2015 and was 5.6% above a year ago through the first seven months. The Commerce Department reported that residential construction spending rose 1.7% from a year ago, led by multi-family housing.
The manufacturing index of the Institute for Supply Management fell in August and signaled contraction for the first time in six months. Of 18 industries in the survey, 11 reported contraction. Only six had increased new orders in the month; eight expanded production. Manufacturing has been hampered by weakened global markets and currency exchange rates that have made U.S. goods more expensive abroad.
A component of the manufacturing sector – and one closely tied to consumer spending – the automotive industry had a slower pace of motor vehicle sales in August. At an annual sales rate of 17 million vehicles, car dealers experienced a deceleration from the year-earlier pace, according to Auto Data Corp. Year-to-year, trucks outpaced cars; domestic vehicle sales fell off more than imports.
The moving four-week average for initial unemployment claims fell for the second week in a row, remaining 27% below the long-term average, according to Labor Department data. Persistently low jobless applications suggest an ongoing reluctance by employers to let go of their workers, which should strengthen the hiring market.
Employers added 151,000 jobs in August, less than expected and lower than the three-month (204,000) and 12-month (232,000) averages. Data from the Bureau of Labor Statistics showed payroll counts slowing while the unemployment rate stayed at 4.9% for the third month in a row. Average hourly wages rose 2.4% from August 2015, continuing to outpace inflation but down from the 2.7% 12-month raise in July.
The Commerce Department said factory orders increased in July for the first time in three months. Excluding volatile transportation components, orders rose for the third month in a row, though they are still 3.7% behind where they were a year ago. An indicator for business investments gained for the second consecutive month.
The U.S. trade deficit narrowed 11.6% in July as exports rose 1.9% and imports fell 0.8%, according to the Bureau of Economic Analysis. The gain in exports was the biggest in more than two years, as farm exports reached a record high. Lower imports included less oil as prices rose for the fifth month in a row.
Where the Markets Closed for the Week
- Nasdaq – 5,245, up 26 points or 0.5%
- Standard & Poor’s 500 – 2,180, up 11 points or 0.5%
- 10-year U.S. Treasury Note – 1.6%, down 0.03 point
- Dow Jones Industrial – 18,492, up 97 points or 0.5%