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I hope everyone had a good weekend! Mine went well, even if I didn’t do much. Not much happened in stocks last week as they ended the week where they started.

As in life, sometimes it’s not where you start or finish, but how you get there. Let’s see what drove the markets!

Headline News

As always, this week’s report was put together with assistance from Econoday.1 Let’s get into it!

Producer Price Index (PPI)

Prices on the production side were up 0.6% in July, showing marked improvement. Despite this, they’re still down 0.4% on the year. However, when food and energy prices were excluded, they were up 0.5% on the month and 0.3% for the year.

Finally, when trade services were further removed, production prices were up 0.3% in July and 0.1% since the same time a year ago. The big drop when these were removed had to do with sales on the retail and wholesale side being up 0.8% monthly.

Energy prices were up 5.3% for the month. Meanwhile, the price of food was down 0.5% in July as many prices were down 8%. There was also a boost in service prices of 0.8%, including a 7.8% increase in portfolio management fees with stronger financial markets.

Finally, there were big gains in machinery and vehicle wholesaling, car and truck retail prices and legal fees.

MBA Mortgage Applications

Like the Freddie Mac survey of mortgage rates, the Mortgage Bankers Association survey is a lagging indicator, meaning any data reported in this survey is from the prior week.

Even though events have driven mortgage rates slightly higher in the past few trading days, the average rate on a 30-year fixed mortgage was down 8 basis points to 3.06%.

That, in part, had a lot to do with mortgage applications being up 6.8% in the survey including a 2% increase in purchase applications for a 21.8% year-to-year gain. Meanwhile, the refinance index was up 9.1% for the week.

Consumer Price Index (CPI)

Prices on the consumer side were up 0.6% for the month of July and have now risen 1% since the same time a year ago. When food and energy were taken out, the monthly gain is still 0.6%, but the pace of price appreciation is 1.6% for the year. This represents a huge monthly gain.

The reasons for the spike included a 9.3% uptick in auto insurance prices and 3.6% increase in the prices of wireless carriers. This is to go along with a 2.3% increase in used vehicle prices, while a 0.8% increase in new vehicles also contributed to the gains.

The prices of airline tickets were up 5.4% as they climb back, but still remain far below normal. The cost of medical care services was up 0.5% with a 0.7% increase in physician costs along with a 0.2% rise in prescription drug and hospital service costs.

Rounding out the gains, there was a 2.5% increase in energy prices with gas prices up 5.6%.

One of the areas to see a decline was food, where prices fell 0.4%. The price of beef was down 8.2% while the cost of food at home was down 1.1%.

Jobless Claims

Initial jobless claims were down 228,000 to settle at 963,000, the first time they’ve been below 1 million since before the full impact of COVID-19 was felt. Meanwhile, the 4-week moving average of initial claims was down 86,250 to settle at about 1.253 million.

On the continuing claims side, these were down 604,000 to 15.486 million. The unemployment rate was up 0.4% to 10.6% last week. Finally, the 4-week average of continuing claims was down 454,500 to come in at roughly 16.17 million.

Retail Sales

Retail sales were up 1.2% in July. When excluding cars and trucks, these were up 1.9%. When cars and gas were removed, the number was a 1.5% increase, which matched the gains for a control group not as prone to seasonal fluctuations.

There was a 22.9% rise in sales at electronics and appliance stores. Early back-to-school shopping may have boosted sales at clothing stores, which were up 5.7%. There was also a 5% increase in restaurant sales. Finally, nonstore retailers like e-commerce and catalogs were up 0.7%

Auto sales were down 1.2%, while gas sales rose 6.2% on higher prices.

Industrial Production

Production was up 3% overall on the month of July with manufacturing production being up 3.4%. Space utilization in factories was at 70.6%, up 2.1% for July. Production is still 8.4% below where it was in February.

Utility production was up 3.3% as people had their air-conditioning cranking. Mining was also up 0.8% which is the first gain in 5 months.

Consumer Sentiment

Consumer sentiment ticked up slightly in August, rising 0.3 points to 72.8 overall. This is down 5 points compared to where it was in June and has fallen almost 30 points in comparison to February before COVID-19 hit.

The gain was rooted in a 0.6-point uptick in expectations to 66.5. Meanwhile, consumers are a little more pessimistic about current conditions as this was down 0.3 points to 82.5. The analysts who put out the report speculated that the lower current conditions reading had to do with doubts about additional government stimulus coming through.

Inflation expectations were flat at 3% in the next year and up 0.1% at 2.7% over the next 5 years.

Mortgage Rates

Mortgage rates moved up last week according to Freddie Mac. However, they’re still below 3% for a 30-year mortgage, which is incredibly low. If you’re ready to get started, feel free to speak with one of our Home Loan Experts.

The average rate on a 30-year fixed mortgage with 0.8 points paid in fees was up 8 basis points last week at 2.96%. This has fallen from 3.6% a year ago.

Meanwhile, the average rate on a 15-year fixed mortgage was up a couple of basis points to 2.46% with 0.8 points paid. This has dipped from 3.07% last year.

Finally, the average rate on a 5-year hybrid, treasury-indexed adjustable rate mortgage with 0.4 points paid in fees was unchanged at 2.9%, having declined from 3.35% last year.

Stock Market

The stock market was mostly flat Friday. Economic data was mixed. Travel stocks were up a bit and people are still looking for any news on stimulus from the government.

At the same time, some of the biggest talk of the week centered around the fact that Apple and Google pulled the popular third-person shooter “Fortnite” from their app stores for violating their policies around trying to make sales outside of the platforms themselves, followed by lawsuits from the developer.

I mention that only because in a time where everything seems driven by spread and who can reopen and who can’t, it’s kind of refreshing to see an old-fashioned battle over competition practices in the context of video game revenue.

The Dow Jones Industrial Average was up 34.3 points Friday and 1.81% on the week after closing at 27,931.02. Meanwhile, the S&P 500 finished at 3,372.85, down 0.58 points on the day, but up 0.64% on a weekly basis. Finally, the Nasdaq was up 0.08% on the week despite finishing down 23.2 points Friday to close at 11,019.3.

The Week Ahead

Monday, August 17

Housing Market Index (8:15 a.m. ET) – The National Association of Home Builders (NAHB®) produces a housing market index based on a survey in which respondents from the organization are asked to rate the general economy and housing market conditions. The index is a weighted average of separate diffusion indexes, including present sales of new homes, sales of new homes expected in the next 6 months and traffic of prospective buyers in new homes.

Tuesday, August 18

Housing Starts (8:30 a.m. ET) – A housing start is registered when the construction of a new residential building begins. The start of construction is defined as the beginning of excavation of the foundation for the building.

Wednesday, August 19

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 August 20

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, August 21

Existing Home Sales (10:00 a.m. ET) – Existing Home Sales tallies the number of previously constructed homes, condominiums and co-ops that were sold during the month. Existing homes (also known as “home resales”) account for a larger share of the market than new homes and indicate housing market trends.

The volume of reports out this week is a little lower, but we do get a lot of key housing data and the sector is a huge economic driver, so it will be something to keep an eye out for. We’ll have it all covered for your next week’s Market Update!

If mortgage rates and economic news don’t have you in a sunny mood this Monday afternoon, we get it. It can be kind of boring. The good news is we’ve got plenty more home, money and lifestyle content to share with you if you subscribe to our mailing list below!

I’m looking to take some vacation next week. If you’re in the same boat looking for a late-summer getaway, here are some vacation savings tips. Have a great week!

1 Important Legal Notice: Econoday has attempted to verify the information contained in this calendar. However, any aspect of such information may change without notice. Econoday does not provide investment advice, and does not represent or warrant that any of the information is accurate or complete at any time. Copyright 2020 Econoday, Inc. All rights reserved.

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