I went to a college football game this weekend, and the initial wheelchair seats I was using were right in front of the student section. I forgot just how loud and crazy those fans get. It was certainly an experience.
It was a loud week on the economic calendar as well. Several important releases were out, including the monthly jobs report, GDP and manufacturing. With that in mind, let’s not belabor the introduction any longer.
International Trade In Goods
On one hand, the U.S. trade deficit in goods was down quite a bit in September, beating expectations and falling to $70.4 billion, which is a $2.7 billion decrease from August. The bad news is that both imports and exports fell, which may signal an overall slowing of the economy.
Let’s start with exports. These were down 1.6% in September. Breaking down the categories, there was a 12.6% dip in exports of foods, feeds and beverages. Meanwhile, car exports were down 7.2% for the month. It’s worth noting that this may have been at least partially related to the GM strike which began in the middle of September. More worrisome is that exports are down 3% overall on the year.
On the import side, these were down 2.3% and have fallen 4.6% since the same time a year ago. Imports of consumer goods fell 5%, while capital goods were down 2.3%. Capital goods are particularly important because they serve as a metric for business investment. Finally, vehicle imports were down 3.5%.
S&P CoreLogic Case-Shiller HPI
There’s been some movement in home price data that would suggest the market is slowing down and data for August is no exception. On a seasonally-adjusted basis, prices were actually down 0.2%, while they were flat overall for the month. Prices in this index are now up just 2% on the year, which represents a 7-year low point.
One important thing to note is that this data is 2 months behind the current market. There have been other sales indicators recently for both new and existing homes that would suggest prices are picking up, which makes a bit of sense given that rates have fallen a bit since September. Lower rates mean buyers can go a bit higher with the offer, but it’s still something to keep an eye on.
Consumer confidence in October was up 0.8 points to 125.9, but that doesn’t tell the whole story as the number missed expectations by quite a bit. More people think jobs are hard to get as this rose to 11.8% of those surveyed, up 0.8 points. Offsetting this was a 2.4% uptick in those who see jobs as plentiful. However, the real tale is told when consumers look to the future. There are fewer people who see jobs opening up over the next 6 months at 16.9% than those who see less job openings in the future at 17.8%.
In good news, 21.1% of people saw their income going up in the next 6 months, which was a 1.4% increase over the last reading. Meanwhile, only 6.5% of people see their income decrease in in the near future. Meanwhile, people seem to be fairly 50/50 on whether the stock market will rise or fall in the future with 31.7% believing the former and 32.2% seeing the market dropping soon.
Buying plans for homes are up in the survey, but fewer people expect to buy cars in the next 6 months. Meanwhile, people expect inflation to rise at 4.8% in the long term, according to this report.
Pending Home Sales Index
Pending home sales, which tracks the number of existing homes with a purchase agreement in place for a future sale were up 1.5% in September to an index level of 108.7. Boosted by lower mortgage rates and a fairly strong job market, this is a good sign for the October existing home sales data.
MBA Mortgage Applications
Mortgage applications were up 0.6% last week as applications to purchase were up 2% and applications to refinance were down 1%.
Despite the average rate on a 30-year fixed conforming mortgage rising three basis points to 4.05%, there’s been a 4% uptick in purchase applications year-to-year.
Gross Domestic Product (GDP)
GDP was up 1.9% in initial estimates for the third quarter. This is just below the final rate of growth for the second quarter, which was 2%. It also beat expectations for 1.7% growth.
Consumer spending was the real strength here as it was up 2.9% in the first estimates. Spending on durable goods was up 7.6% and there were strong gains for both vehicles and recreational goods. Residential investment was also a positive, up 5.1% and having its first positive effect on GDP since the last quarter of 2017. Government spending was also 2%. Non-defense spending was up 5.2%, while military spending rose 2.2% on the quarter.
The downside in the report comes from nonresidential fixed investment, which was down 3%. This is a bad sign for business investment. There was less investment in structures and there was a corresponding drop in construction spending. Equipment spending was also down. Finally, net exports have recently shown some life, but GDP was down it still pulled the overall GDP number down 0.08%. Inventories were also down, which dropped the overall number by 0.05%.
Initial jobless claims were up 5,000 last week to come in at 218,000. Meanwhile, the 4-week average was down by 500 claims to come in at 214,750.
On the continuing claims side, these were up 7,000 to come in at 1.69 million. Meanwhile, the 4-week moving average of continuing claims increased 8,750 to about 1.686 million claims.
Personal Income And Outlays
Personal income was up 0.3% in September and consumer spending rose 0.2% for the month. When taking a look at inflation, prices were flat both overall and in core categories which exclude food and energy. When looking at this on a year-to-year basis, prices were up 1.3% and 1.7% in core categories, which is running below the Federal Reserve’s goal of 2% price growth.
As a bit of a downside, wages and salaries were flat, but this is after being up 0.6% in August. People increased spending on durable goods by 0.4%, which was enough to offset a 0.1% downturn in spending on nondurable goods, while there was a 0.2% uptick in spending on services.
There were 128,000 jobs added to nonfarm payrolls in October, solidly beating expectations for an increase of 90,000 jobs. The unemployment rate was up 0.1% to 3.6% and there was an increase of 0.1% in labor force participation to 63.3%. Employment numbers for August and September were also revised upward, adding a total of 95,000 jobs on the second look.
Some of the numbers here are a little bit deceiving. There were 36,000 jobs eliminated from payrolls in manufacturing, but this is directly related to the GM strike and you should see these jobs come back on the payroll next month. There were also 20,000 jobs eliminated from government work as there were cuts in temporary staffing related to the 2020 census.
Average hourly earnings were only up 0.2%, but this met consensus expectations. These earnings have risen 3% on the year. The average workweek across the U.S. was 34 hours, 24 minutes.
ISM Manufacturing Index
The manufacturing sector is still shrinking, albeit slower than it was in September as the index has risen 0.5 points to 48.3. Unfortunately, this still missed expectations for the index to be at 49.3.
The outlook for new orders was still a bit bleak as their shrinking at 49.1, but this is better than last month. However, new export orders were up more than nine points to 50.4. Unfortunately, this wasn’t enough to bring backlog orders up as these are shrinking quite a bit at 44.1. For context, a number above 50 indicates growth in a particular area, while a number below that point indicates activity has slowed down.
Production fell almost a point to 46.2. Employment shrinkage wasn’t as bad as last month as this metric improved by 1.4 points to 47.2. These numbers should also get better next month now that the GM strike is over. Delivery times are lower is there aren’t as many orders, which won’t help with hiring. Prices paid for manufacturing are also lower, down more than four points to 45.5.
There was a Federal Reserve rate decision last week and they chose to lower short-term interest rates by 0.25%. What’s important to note is that while short-term rates don’t exactly follow the path of longer-term rates like mortgages, they tend to follow the same course in terms of direction. I recommend you check out my full analysis, but Federal Reserve Chairman Jerome Powell stated after the meeting that the Federal Open Market Committee would probably pause future interest rate movements in either direction while still keeping an eye on economic data to determine appropriate moves.
The decrease in short-term interest rates was expected and mortgage rates actually went up a little bit last week. However, rates are still in a very good spotfor those of you in the market to buy or refinance a home. It’s not a bad idea to think about locking your rate.
The average rate for a 30-year fixed conforming mortgage with 0.5 points paid in fees was up three basis points last week to 3.78%. This is still down from 4.83% at this time a year ago.
Looking at shorter terms, the average rate on a 15-year fixed mortgage was up a single basis point to 3.19% with 0.6 points paid. This has fallen from 4.23% last year.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage climbed three basis points to 3.43% with 0.4 points paid. This is down from 4.04% last year at this time.
Both the S&P 500 and Nasdaq hit all-time highs Friday. The momentum was attributed to the stronger-than-expected jobs report. Exxon Mobil also beat its earnings forecast, which helped to lift the Dow Jones Industrial Average.
The Dow was up 301.13 points Friday to close at 27,347.36, up 1.44% on the week. Meanwhile, the S&P 500 finished at 3,066.91, up 29.35 points on the day and 1.47% on the week. Finally, the Nasdaq was up 1.74% on the week after rising 94.04 points Friday to close at 8,386.4.
The Week Ahead
Tuesday, November 5
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.
Wednesday, November 6
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, November 7
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, November 8
Consumer Sentiment (10:00 a.m. ET) – The University of Michigan’s Consumer Survey Center questions 500 households each month on their financial conditions and attitudes about the economy. Consumer sentiment is directly related to the strength of consumer spending.
There’s not much going on next week, but the international trade report will be interesting to look at given the ongoing situation with China. We’ll have it all covered in next week’s Market Update!
If this post has you bored out of your mind, I get it. Economic data doesn’t have the makings of a page-turning thriller. However, if you subscribe to our email list below, we’ve got plenty of home, money and lifestyle content to share with you! As the calendar turns to November, we start thinking about spending time with loved ones. Molly Grace has a great post on family wisdom that spans generations. Have a great week!
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