I hope everyone had a good weekend. My Detroit Tigers now have a four-game win streak, so that’s been pretty exciting to watch. Economic data has been a little more mixed than the recent trend of my favorite team. Let’s jump right in.
Personal Income and Outlays: Personal incomes were up 0.4% in April and consumer spending rose to match it. Meanwhile, prices were up 0.2% both in key categories and overall. Prices have risen 1.5% in core categories and 1.7% as a whole in the last year. A big factor in personal incomes going up is because of a 0.7% increase in wages and salaries. Americans are still saving 5.3% of their income. It is worth noting that inflation data is a little bit lower than the 2% target where the Federal Reserve would like to see it at this point. Finally, spending in March was revised up to 0.3%.
S&P Corelogic Case-Shiller HPI: Home prices moved 0.9% higher in Case-Shiller’s 20-city index on a seasonally adjusted basis in March. Prices are up 1.0% overall and have risen 5.9% on the year. Prices in our hometown of Detroit are up 1.2% while New York prices are up 1.1%. Annual gains are still being led by big cities in the West, including Seattle, which is at 12.2% and Portland, where prices are up 9.2%.
Consumer Confidence: Consumer confidence is still very strong despite being down 1.5 points to 117.9 in May. Few Americans think jobs are hard to get at this point, with just 18.2% of people expressing the sentiment. It’s the best reading of the recovery. Meanwhile, 19.2% of Americans are optimistic with just 8.7% being pessimistic. More Americans see more job openings in the future, 18.6% of those surveyed, than less, 12.0%. Buying plans are down for cars, appliances and housing. Part of this may have to do with the fact that people see long-term inflation at just 4.7%. Although this keeps prices down, the lack of expectation for a rise doesn’t create much buying urgency.
MBA Mortgage Applications: The average rate on a 30-year fixed-rate conforming mortgage held steady at a very low 4.17%. Still, it wasn’t enough to lift mortgage applications, which were down 3.4% overall. Purchase applications were down 1.0% and applications to refinance fell 6.0%.
Pending Home Sales Index: Pending home sales were down 1.3% in April, meaning less homes had a purchase agreement in place for sale. There are also 3.3% lower than they were at this time last year. Finalized sales of existing homes were also down.
Jobless Claims: Initial jobless claims rose 13,000 last week to 248,000. The four-week average rose 2,500 to 238,000. A big reason for this swing may have been that much data was estimated because of Memorial Day. Continuing claims were down 9,000 to 1.915 million. The four-week moving average is down 16,000 from the previous week.
ISM Manufacturing Index: Manufacturing numbers held pretty steady, up 0.1 points overall to 54.9 in May. New orders are very good at 59.5. Exports are also up at 57.5. Manufacturing backlogs are building at 55.0. In what may be a positive sign for future hiring, there’s also strength in production and import orders, and deliveries are rising. Employment came in at 53.5, meaning it’s growing slightly faster than in April when it came in at 52.
Employment Situation: This was the report with the big miss, but even so, a closer look reveals a mixed bag in terms of the data. Nonfarm payrolls grew by just 138,000 jobs in May, below expectations for 185,000 added jobs. On the good side, the unemployment rate fell from 4.4% to 4.3%. However, part of this may be that the labor force participation rate fell from 62.9% to 62.7%. Average hourly earnings were up 0.2% and have risen 2.5% on the year. The average workweek was steady at 34 hours, 24 minutes. Digging slightly deeper into the data private payrolls grew by 147,000 jobs, but 9,000 government jobs were cut. The manufacturing sector lost 1,000 jobs and retail lost 6,000. On the plus side, 11,000 jobs were added in both construction and financial services. Professional service jobs saw 38,000 added to the payroll.
International Trade: International trade did not have a good month of April. First, the deficit for March widened, coming up to $45.3 billion from $43.7 billion. Then, the trade deficit widened to $47.6 billion in April results. Exports were down 0.3% to $191.0 billion. This is mostly due to a drop in goods exports imports were up 0.8% to 238.6 billion. We imported more goods, but services were up as well.
Mortgage rates fell in the short week following Memorial Day. That being said, it’s a great time to lock a low rate.
Moving on, 30-year fixed-rate mortgages (FRMs) averaged 3.94% with an average 0.5 point for the week ending June 1, 2017, down from the last week when it averaged 3.95%. At this time a year ago, 30-year FRMs averaged 3.66%.
Next, the 15-year FRMs this week averaged 3.19% with an average 0.5 point, the same as last week. A year ago at this time, 15-year FRMs averaged 2.92%.
Lastly, 5-year Treasury-indexed hybrid adjustable rate mortgages (ARMs) averaged 3.11% this week with an average 0.5 point, up from last week when it averaged 3.07%. A year ago at this time, 5-year ARMs averaged 2.88%.
A weak jobs report apparently had little impact on Wall Street Friday. Stocks closed at all-time highs.
The Dow Jones Industrial Average was up 0.60% on the trading week as it closed up 62.11 points Friday at 21,206.29. The S&P 500 finished Friday at 2,439.07, up 9.01 points on the day and 0.96% on the week. Finally, the Nasdaq rose 58.97 points Friday to close at 6,305.80. This was up a weekly 1.54%.
The Week Ahead
Wednesday, June 7
MBA Mortgage Applications (7:00 a.m. ET) – The mortgage applications index measures applications to mortgage lenders. This is a leading indicator for single-family home sales and housing construction.
Thursday, June 8
Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to report the number of individuals filing for unemployment insurance for the first time. An increasing trend suggests a deteriorating labor market. The four-week moving average of new claims smooths out weekly volatility.
As you can see, it’s going to be a light week for next Monday’s Market Update, possibly due to cramming everything into the short week following Memorial Day. With all of this extra time, it’s a great opportunity to check out our other home, money and lifestyle content by subscribing to the Zing Blog below. With summer in full swing, check out our tips for a successful outdoor party.
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