The vast majority of us across the U.S. have tomorrow off for Independence Day. I’m looking forward to it as I’m sure you are. Before we look ahead to the rest of the short week though, let’s take a peek at what happened in the week that was.
Durable Goods Orders: New orders of durable goods came in down 1.1% in May. Despite this, they’re still up 2.7% on the year. A downturn in the number of orders for commercial aircraft, down 12%, may have had a lot to do with this. When transportation was removed, orders were up 0.1% and are up 5.5% on the year. Other positives include a 0.6% rise in machinery orders and vehicle orders that were up 1.2%. Shipments were also up 0.8%. However, there were other negatives. Orders of core capital goods fell 0.2% despite having risen 5.0% on the year. Finally, total unfilled orders and inventories both rose 0.2%.
S&P Corelogic Case-Shiller HPI: Home prices were up 0.3% in the month of April on a seasonally-adjusted basis. They were up 0.9% on the month overall and have risen 5.7% on the year, a slight slowing in the pace of price appreciation. Prices in many of the top markets which have been leading the way were down in April. Seattle prices were down 0.6%, while prices in Boston and Cleveland fell 0.7% and 1.0%, respectively. Seattle is up 12.9% on the year. Cleveland shows the slowest appreciation, up only 3.4% annually.
Consumer Confidence: Confidence among consumers rose 1.3 points in June to 118.9, beating expectations by more than two points. The current conditions index was up 5.7 points to 146.3, near highs not seen in the last 16 years. Among the highlights is a 0.3% decrease in the number of Americans describing jobs as hard to get to 18.0%. It wasn’t all good news. The expectations component was down 2.3 points to 100.6. A 1% increase in the number of Americans optimistic about the possibility of future raises to 22.2% wasn’t enough to make up for the 0.5% increase to 9.2% in those who are pessimistic about future income increases. Inflation expectations were also down 0.1% to 4.6%. Finally, fewer Americans plan to buy houses and cars in the near future.
MBA Mortgage Applications: Mortgage applications fell 6.2% last week. The number of purchase applications was down 4.0% and refinance applications fell 9.0%. This happened despite the average rate on a 30-year-fixed conforming mortgage remaining the same at 4.13%.
International Trade in Goods: The U.S. trade deficit in goods waned in May, falling by $1.2 billion to $65.9 billion. This was helped by a 0.4% rise in exports and a matching decline in imports. On the export side, they were up to $127.1 billion, helped by a 6.0% rise in the number of consumer goods shipped elsewhere. Vehicle exports were also up 4.8%. In one negative, capital goods exports were down 0.4%. Imports of goods fell to $193.0 billion. Consumer goods imports were down 3.8% and vehicle imports fell 2.4%. Imports for capital goods were up 2.3%, but this is seen as a positive for business investment.
Pending Home Sales Index: The number of homes with a purchase agreement in place fell 0.8% to a new index level of 108.5 in May. The downturn is spread pretty evenly regionally, but the West had the biggest decline, down 1.3%.
Gross Domestic Product (GDP): Real GDP was up 1.4% in the final reading for the first quarter. This was a 0.2% increase over prior estimates and the consensus expectations. Consumer spending was also up a bit, to 1.1% from 0.6%. Despite this, it was the weakest consumer spending has been in four years. Inventory growth was also down 1.1%. Final sales were up 2.6%. Residential investment was up 1.2%, as was business investment. Government purchases and net exports both dropped 0.2%.
Jobless Claims: Initial claims were up slightly, rising 2,000 to 244,000. The four-week moving average was down by 2,750, coming in at 242,250. Continuing jobless claims were up 6,000 to 1.948 million. The four-week moving average was up 7,250, just under 1.939 million.
Personal Income and Outlays: Personal incomes were up 0.4% in May despite wages and salaries only being up 0.1%. Most of the increase came from income transfers and an increase the incomes of actual business owners. Consumer spending, therefore, was only up 0.1%. Meanwhile, the savings rate was up 0.4% to 5.5%. Consumers also didn’t have to spend as much, as prices were down 0.1% overall and only up 0.1% in core categories. Inflation rates in both of these areas are at 1.4% for the year. There was a 0.5% drop in spending on nondurable goods and a 0.3% downturn in durable spending. However, there was a 0.3% gain in spending on services.
Consumer Sentiment: Consumer sentiment rose 0.6 points in the final reading of June to come in at 95.1. Still, this is weaker than 97.1 in May. Current conditions were up 0.7 points to 112.5, which should be a good sign for June consumer spending. The expectations component was down almost 4 points to 83.9 in the lowest showing since October. Inflation expectations are also low, coming in at 2.6% over the next year. Five-yearr expectations are down 0.1% to 2.5%.
Fixed mortgage rates dropped lower last week. It’s worth noting that Freddie Mac says the majority of its survey was conducted before a Tuesday bond selloff pushed treasury yields, and thus rates, higher. Still, rates are pretty low. It’s a good time to lock your rate.
First, 30-year fixed-rate mortgages (FRMs) averaged 3.88% with an average 0.5 point for the week ending June 29, 2017, down from last week when they averaged 3.90%. A year ago at this time, 30-year FRMs averaged 3.48%.
Looking at shorter terms, 15-year FRMs this week averaged 3.17% with an average 0.5 point, the same as last week. A year ago at this time, 15-year FRMs averaged 2.78%.
Finally, 5-year Treasury-indexed hybrid adjustable rate mortgages (ARMs) averaged 3.17 % this week with an average 0.5 point, up from last week when they averaged 3.14%. A year ago at this time, 5-year ARM averaged 2.70%.
Stock results were mixed on Friday, but the Nasdaq posted its best first half since 2009. That’s not bad.
The Dow Jones industrial average was up 62.60 points to close at 21,349.63, down 0.21% for the week. The S&P 500 fell 0.61% since last Friday’s close, but it was up 3.71 points on the day to close at 2,423.41. Finally, the Nasdaq was down to end the week, falling to 6,140.42 after losing 3.93 points Friday and 1.99% on the week.
The Week Ahead
Monday, July 3
ISM Manufacturing Index (10:00 a.m.) – 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.
Tuesday, July 4
All markets and lenders are closed for Independence Day.
Wednesday, July 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, July 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 four-week moving average of new claims smooths out weekly volatility.
Friday, July 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 bit of a slow week in terms of volume, but we do get two reports that typically have the potential to move rates around with manufacturing numbers and the monthly employment report. That should be plenty to keep you on your toes. If all this economic and mortgage stuff isn’t for you, we have plenty more home, money and life tips if you subscribe to the Zing Blog below. If you’re still looking for ideas for that big Fourth of July bash, check out expert tips for a last-minute gathering. Have a great fourth and a great week!
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