I hope everyone had a good weekend. Hopefully you rested up because there’s a ton of economic data to absorb this afternoon. Let’s dive in!
S&P CoreLogic Case-Shiller HPI
Home prices began to really show a trend toward leveling off in March. They were up only 0.1% on a seasonally adjusted basis for the month despite being up 0.7% overall. Year-over-year price growth was only 2.7%, down from 3% in February, but still above consensus growth estimates of 2.5%.
Things were uneven across the 20-city index. San Diego and San Francisco both saw 0.7% increases in home prices. Meanwhile, New York City was flat and Dallas and Chicago saw price decreases of 0.1% and 0.2%, respectively.
Meanwhile, looking at annual trends, San Diego and San Francisco are bringing up the tail end of value increases along with Los Angeles, sitting at 1.3%. Meanwhile, Las Vegas is out front at a rate of 8.2% annual growth, although this is down from a 13.9% pace in August.
FHFA House Price Index
Released by the Federal Housing Finance Agency, this report matches the S&P assessment for March, with only 0.1% price growth. The annual changes are little bit better, with prices up 5%. It’s worth noting that this report only looks at conventional loans backed by Fannie Mae or Freddie Mac when getting home price data. The 5% rate is also a 4-year low.
In regional trends, most of the regions are close together in terms of annual price appreciation. However, the Mountain region leads the way, with 7.1% annual growth, while the Middle Atlantic trails at only a 3% uptick.
Consumer Confidence came in better than expected in May at 134.1, up almost 5 points from April. This is the best it’s been since last November.
Delving into the details, only 10.9% of people say jobs are hard to get versus 13.3% in April. Additionally, 1.2% more people say that jobs are plentiful, up to 46.5% of those surveyed. Also in the data set, 19.2% of people see more jobs opening up in the next six months. This is 2.5% more than last month for this metric. Expectations for future income are more mixed with more people seeing an increase, but also more people who see incomes dropping with fewer people in the middle.
Although this is expected to go up eventually with the ongoing tariff battles with China, and now Mexico, inflation expectations are muted in this report, down 0.2% to 4.4% overall.
MBA Mortgage Applications
Overall mortgage applications were down 3.3% last week including a 1% drop in purchase applications and a 6% drop in applications to refinance.
Despite this, year-over-year growth has been strong for this metric, up 7% overall. This has been helped by wall mortgage rates, which were flat last week at 4.33% for a conventional 30-year fixed mortgage.
Gross Domestic Product (GDP)
The economy grew at a rate of 3.1% in the first quarter, and the second preliminary estimate. This is down 0.1% from the initial estimate but is higher than consensus expectations for a 3% growth rate.
As a positive sign, consumer spending came in 0.1% higher than initial estimates at 1.3% growth. Meanwhile, inventories were down a bit compared to the first estimate. Meanwhile, net exports also fell a bit compared to the first report but were still the biggest reason for GDP gains.
Government purchases did contribute to the economic growth while residential fixed investments continued its downturn, 0.7% lower than where it was before for a total of 3.5% less residential investment in the first quarter. Finally, prices both overall and in core categories were down 0.1% to 0.8% and 1.2%, respectively.
While weaker than initial estimates, analysts say they’re particularly encouraged by the growth in net exports, but they’re wary given the ongoing trade disputes.
International Trade in Goods
The national goods gap increased by $200 million to $72.1 billion. This is a deep deficit at this point.
On the export side, these were down 4.2% in April. Capital goods exports, which represent the biggest category, fell by 6.5% to $44.3 billion capital goods are down 3.7% since the same time a year ago. Car exports were down 7.2% to $12.9 billion, 6.7% lower than last year. Food and feed exports were the only ones that were up, rising 0.5% to $11.2 million, still 6.2% lower than last year.
Looking at imports, these were down 2.7%. In a negative for business investment, capital goods imports were down 3.5% to $55.4 billion. Meanwhile, car imports were down 2.3% to $30.9 billion as consumer goods fell by the same amount to come in at $54.2 billion. Finally, there was a 1.1% drop in food imports at $12.8 billion.
Initial jobless claims increased 3,000 to 215,000 last week, but the slight rise wasn’t enough to stop a 3,750-claim decrease in the 4-week moving average at 216,750.
Meanwhile, on the continuing claims side, these were down 26,000 to 1.657 million. Meanwhile, the 4-week moving average was down 3,500 to about 1.673 million.
Pending Home Sales Index
Pending home sales were down 1.5% on the month of April to come in at 104.3. The dip in the number of existing homes under contract for sale doesn’t point to good things for upcoming existing home sales numbers.
The only mitigating factor here is March’s 3.9% uptick in revisions, but still, the dip doesn’t help the outlook for housing market activity heading into the busy spring and summer sales season.
Personal Income and Outlays
Personal incomes were up 0.5% in April and this helped drive a 0.3% increase in consumer spending. Also contributing to the spending increase was an equal increase in overall prices, while prices in core categories were up 0.2%. Prices in this index are up 1.5% overall and 1.6% in consumer staples.
Although incomes were up 0.5%, some of the contribution came from other areas like investment income and interest earned. Wages and salaries were only up 0.3%. In addition, although there was an increase in consumer spending, most of it is in nondurable goods due to increases in gas prices.
Inflation continues to be something to keep an eye on as it continues to run a bit below the Federal Reserve’s 2% target.
In finalized numbers for May, consumer sentiment was down 2.4 points to an even 100. This is still higher than the end of April at 97.2.
There was a 6.1% uptick in expectations at 93.5 for the month, while consumers’ assessments of the current state of things was down 2.3 points to 110. One keynote is that tariff concerns may be showing up here in the form of rising inflation estimates which were up 0.3% in both the next year and over the next 5 years to come in at 2.8% and 2.6% each.
Mortgage rates fell fairly substantially last week, fueled by a move to bonds as concerns continue to mount over the potential impact of prolonged trade wars with China and Mexico. If you’re in the market for a mortgage, you’re the beneficiary of this uncertainty and it’s a great time to lock your rate.
The average rate on a 30-year fixed mortgage with 0.5 points paid in fees was 3.99%, down 7 basis points from last week. This has fallen from 4.56% last year.
Meanwhile, looking at shorter terms, a 15-year fixed mortgage averaged 3.46% with 0.5 came in down 5 basis points on the week and falling from 4.06% last year.
Finally, the average interest rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage (ARM) with 0.4 points paid fell 8 basis points to 3.6%. This is down from 3.8% from a year ago.
President Trump threatened new tariffs on Mexico in hopes of extracting promises from them to help control immigration at the border. This spooked stock market investors who were already concerned over an ongoing battle with China that shows no signs of abating.
The Dow Jones Industrial Average was down 354.84 points Friday to finish at 24,815.04, down 3.01% over the previous five-day period. Meanwhile, the S&P 500 was down 2.62% over the last five days after falling 36.8 points on the day to finish at 2,752.06. Meanwhile, the Nasdaq closed at 7,453.15, down 2.41% since last Thursday and 114.57 points on the day.
The Week Ahead
Monday, June 3
ISM Manufacturing Index (10:00 a.m. ET) – This index measures the general direction of manufacturing within the U.S. The qualitative survey of purchasing managers looks at production, new orders, order backlogs, inventories and supplier deliveries, among other factors.
Wednesday, June 5
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 6
International Trade (8:30 a.m. ET) – International trade is composed of merchandise (tangible goods) and services. It’s available by export, import and trade balance for six principal end-use commodity categories, and for more than 100 principal Standard International Trade Classification system commodity groupings.
Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to show the number of individuals filing for unemployment insurance for the first time. An increasing trend suggests a deteriorating labor market. The 4-week moving average of new claims smooths out weekly volatility.
Friday, June 7
Employment Situation (8:30 a.m. ET) – The employment situation report measures unemployment in the labor force as well as the sentiments of workers about the job market.
It’s a lighter week in terms of volume of economic data, but the reports that come out this week are incredibly important. There’s the manufacturing report as well as Friday’s jobs report which is always a key economic indicator. The international trade report will also take on added importance given the ongoing tariff situation. All that and more will be covered in next week’s Market Update.
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