I feel like I’m not fully awake yet as I write this morning. It’s been a bit of a sluggish start to the week. It’s not unlike my sports teams recently, but I digress.
After a bit of a sluggish start, the economic reports were a better than my football and baseball teams yesterday, so that’s a good thing.
As usual, this report was put together with the assistance of analysis from Econoday.1 Let’s see what happened!
While industrial production grew in August, it didn’t match analysts’ estimates, increasing only 0.4% on the month compared to expectations for a 1.2% increase. Meanwhile, manufacturing output was up 1% compared to a 1.9% estimate. Finally, capacity utilization in factories was up 0.3% to 71.4%.
One thing that didn’t help was a 2.5% decrease in mining. Utility production was also down 0.4%. They represent major components of the report.
On the manufacturing side, there was an 8% downturn in the production of cars and trucks for consumers. Materials manufacturing was also down 0.2%. Business equipment manufacture was up 1.9%, to go along with a 1.2% increase in production of construction equipment.
When adjusting for inflation, production is down 7.3% compared to February. This means that the pace of the recovery in this report is slowing and could take until next year to get back to pre-virus levels. It’s not a good omen, but we’ll be keeping an eye on it.
MBA Mortgage Applications
Mortgage applications were down 2.5% last week as the refinance portion of this index saw applications fall 4% and purchase applications down 1%. Still, these components are up 30%, and 6% from a year ago, respectively.
The average rate for a 30-year fixed conventional mortgage was flat at 3.07%. Meanwhile, on the jumbo side, rates were up a single basis point to 3.41% for the week.
Retail sales were up 0.6% overall and 0.7% when taking out vehicles and also when further removing gas. Unfortunately, within a control group that takes out components like restaurants and building materials, sales were down 0.2%. Additionally, every metric came in below estimates.
Let’s start with the good news. Restaurant sales were up 4.7% and sales of building materials were up 2%. But the rest of the report was underwhelming.
General merchandise sales were down 0.2% with department stores falling 2.3%. Food and beverage sales were down 1.2% and grocery stores saw a 1.6% dip in sales, likely explained by the increase in restaurant spending. Vehicle sales were only up 0.2% after having fallen 1% in July.
Regulations on business due to the virus have made monthly data a little up and down, so to get it more complete picture elements to look at the sales compared to last August. Vehicle sales are up 4.5% and food and beverage sales have risen 10%. Non-store retail, which is mostly e-commerce, saw flat sales for the month.
On the downside, restaurant sales have fallen 15.4% since last year. Gasoline sales are down by the same amount, a combination of weak demand from people not driving and low prices. Closing sales have fallen 20.4% and department stores sales have dropped 16.9%.
Still, there’s some positive here. Retail sales are up 2.6% on the year. This is compared to a 4.2% pace of annual appreciation in February.
Housing Market Index
Builders are feeling pretty confident in September, the housing market index was up 5 points to 83, which is a new record after a record-setting August.
Traffic is up 9 points at 73. It’s not long ago that this portion of the index was stubbornly stuck in the mid-40s. More prospective buyers are walking through homes. Current sales were up four points to 88, while sales of in the next 6 months rose to 84, 6 points higher.
Housing Starts And Permits
Housing starts were down 5.1% to 1.416 million in August instead of dreading market. There’s some thought that this is tied to supply and labor problems in the market. The good news is that single-family starts were up 4.1% to 1.021 million. Multifamily starts were 375,000.
On the permit side, these were down 0.9% to come in at 1.47 million. However, authorizations to build single-family homes were up 6% to 1.036 million. Multifamily building permits came in at 381,000.
The real downside here is completions. These were down 7.5% overall to 1.233 million. Single-family completions were down 4.4% to 912,000, while multifamily completed construction was at 312,000 units. That’s not helping the supply pressures happening right now.
Initial jobless claims were down 33,000 to 860,000 last week on a seasonally adjusted basis. The 4-week moving average of initial claims was down 61,000 to come in at 912,000.
On an unadjusted basis, actual claims were down 75,974 to come in at 790,021. There’s no 4-week average when it comes to these unadjusted claims.
On the continuing claims side, these were down 916,000 at 12.628 million. The 4-week moving average of continuing claims fell 532,750 to about 13.489 million. The unemployment rate fell 0.7% to 8.6% in last week’s data.
On an unadjusted basis, the unemployment rate was down 0.7% to 8.4%. Continuing claims were down 1.034 million to about 12.321 million.
Consumer sentiment was up 4.8 points to an index level and 78.9. There’s still a long way to go to get back to the 101 level seen in February.
Current conditions were up about 5 points to 87.5, while expectations rose roughly the same out at 73.3. There were positive notes on both the COVID-19 and overall economic recovery that are driving optimism.
Inflation expectations were down 0.4% at 2.7% over the next year. Over the next 5 years, 2.6% inflation is expected, down 0.1%.
Mortgage rates should stay low for quite a while, at least that’s the impression you get based on the moves of the Federal Reserve. The Fed chose to keep short-term rates where they’re at. Beyond that though, they want to keep rates low until 2024 based on median projections.
The reasoning for this is that they feel inflation has been low for so long that they’re willing to let it run higher than the 2% goal for a while if it means 2% annual price growth over the long term. The Fed wants to see inflation go up because it encourages people to buy now, and if people are buying, businesses will produce more goods and services.
Between that and the Federal Reserve buying a bunch of agency mortgage-backed securities (MBS). As regular readers will know, if more people are buying MBS, mortgage rates will be lower because the rate of return on the bonds underlying those rates doesn’t need to be as high in order to attract a buyer.
That said, it’s hard to imagine rates going much lower than they are, so if you’re in the market to buy or refi a home, it’s a good time to do so.
The average rate on a 30-year fixed mortgage with 0.8 points paid in fees was up a single basis point to 2.87%. This is down from 3.73% a year ago.
Meanwhile, the average interest rate on a 15-year fixed mortgage with 0.8 points paid fell 2 basis points to 2.35% which is down from 3.21% last year.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage (ARM) was down 15 basis points to 2.96% with 0.3 points paid. This is down from 3.49% in mid-September of last year.
The stock market had its third straight week of losses as the Dow Jones Industrial Average was down more than 240 points Friday. Tech stocks again led the losses.
The Dow Jones Industrial Average was down 244.56 points Friday to close at 27,657.42, down 0.03% for the week. Meanwhile, the S&P 500 closed at 3,319.47, down 37.54 points on the day and 0.64% for the week. Finally, the Nasdaq was down 0.56% for the week as it fell 117 points Friday to close at 10,793.28.
The Week Ahead
Tuesday, September 22
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.
Wednesday, September 23
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.
FHFA House Price Index (9:00 a.m. ET) – The Federal Housing Finance Agency House Price Index covers single-family housing using data provided by Fannie Mae and Freddie Mac. The HPI is derived from transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac.
Thursday, September 24
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.
New Home Sales (10:00 a.m. ET) – This report measures the number of newly constructed homes with a committed sale during the month.
Friday, September 25
Durable Goods Orders (8:30 a.m. ET) – These are based on new orders placed with domestic manufacturers for factory goods.
There’s lots of housing data on the calendar. Durable goods is always a big report as well.
If all this data and economic reporting aren’t your cup of tea, feel free to check out our other home, money and lifestyle content by subscribing to our mailing list below. This week, here’s something on getting rid of ants.
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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