Last week saw some heavy hitting economic reports, including GDP and personal incomes. There was also some housing data at the front of the week. Let’s get right into it.
New Home Sales: The rate of new homes sales was down 7.6% in August to just 609,000 on a seasonally adjusted basis. However, July saw 5,000 sales added in a revision. The median price of a new home was down 3.1% to $284,000 and is down 5.4% on the year, which shows builders are giving discounts despite a low supply in the market at 4.6 months. However, even with this low figure, supply is up 8.3% on the year. Sales in the West were up 8.0%, but all other regions saw less sales, with the South down 12.3%.
S&P Corelogic Case-Shiller HPI: Home prices were flat on a seasonally adjusted basis in July, but they’re up 0.6% overall and 5.0% on the year. New York City has the weakest year-on-year gains at 1.8%, followed by Washington D.C. at 2.1%. Six of the 20 cities surveyed have declines, including New York, Chicago and Atlanta. Portland and Denver aren’t slowing down at all with year-on-year gains of 12.5% and 11.2%, respectively.
Consumer Confidence: Consumer confidence was up 2.3 points to 104.1 in the September survey. The labor market is also looking strong with more people saying jobs are plentiful and fewer saying that they are hard to get. One-year inflation expectations are also at 0.2% to 5.0%. On the negative side, fewer people see their income going up in the near future and long-term buying plans are also on the lower side.
MBA Mortgage Applications: Overall mortgage applications were down 0.7% last week. Purchase applications were up 1.0%, but refinances were down 2.0%. The average rate on a 30-year-fixed mortgage was down four basis points to 3.66%.
Durable Goods Orders: New orders were flat for the month of August. They’re down 1.3% on the year. Taking out transportation, which saw a 22% decline in orders of civilian aircraft, they are down 0.4% and 1.1% on the year. Core goods are down 0.6% and 3.1%, annually. Shipments are down 0.4%. Inventories are down 0.1%. Vehicles and defense goods did have strong gains.
Gross Domestic Product (GDP): Second-quarter GDP was up 1.4% in the final revision. This represents a 0.3% gain from the first revision. Nonresidential investment is up 1.0%. It had been negative leading up to this. Residential investment is still down 7.7% for the quarter and is dragging the overall number down 0.3%. Consumer spending was up 4.3%. This helped add 2.9% to overall GDP. Other gainers included exports which for up 0.6% and added 0.2% overall. The price index is flat at 2.3%.
International Trade in Goods: The nation’s goods deficit decreased by $900 million in August to $58.4 billion. Exports were up 0.7%. Industrial supplies, vehicles and consumer goods all had strong months that helped offset a 3.5% decline in food exports. However, these had been at 34% the month before. Imports were up 0.3% as capital goods were up.
Jobless Claims: Initial claims were up 3,000 at 254,000. On the other hand, the four-week average was down 2,250 to come in at 256,000. Continuing claims showed massive improvement, down 46,000 to 2.062 million. The four-week moving average was down 23,750 at 2.115 million.
Pending Home Sales Index: Pending home sales were down 2.4% to an index level of 108.5. This points to some weakness in existing home sales in August. The Northeast was up 1.3%. This was the only region that was up on the month.
Personal Income and Outlays: Personal incomes were up 0.2% month-to-month. However, wages and salaries were only up 0.1%. Consumer spending was flat in August as vehicle sales were weaker and also nondurable goods declined in price with gas prices falling. Service spending was up 0.3%. In terms of inflation, prices were up 0.1% overall and 0.2% in core categories. Inflation is at 1.0% and 1.7% in each of those categories annually.
Consumer Sentiment: Consumer sentiment came in at 91.2 in the final reading of September. This was 1.4 points higher than where it was midmonth. The expectations component specifically is up four points to 82.7 and there’s higher confidence among those in higher income households. Current conditions fell three points to come in at 104.2. This is seen as a negative for consumer spending.
Fixed rates were down last week as investors flooded the bond market.
30-year fixed-rate mortgages (FRMs) averaged 3.42% with an average 0.5 point for the week ending September 29, 2016, down from last week when they averaged 3.48%. A year ago at this time, 30-year FRMs averaged 3.85%.
15-year FRMs this week averaged 2.72% with an average 0.5 point, down from last week when they averaged 2.76%. A year ago at this time, 15-year FRMs averaged 3.07%.
5-year Treasury-indexed hybrid adjustable rate mortgages (ARMs) averaged 2.81% this week with an average 0.4 point, up from last week when they averaged 2.80%. A year ago, 5-year ARMs averaged 2.91%.
Stocks were quite a bit higher Friday as Apple was up, along with certain key financial company shares.
The Dow Jones Industrial Average was up 164.70 points Friday to close at 18,308.15. This was up 0.26% on the week. The S&P 500 was up 17.14 points to finish at 2,168.27, rising 0.17% since opening on Monday. Finally, the NASDAQ closed the week at 5,312.00. This was up 42.85 points on the day and 0.12% on the week.
The Week Ahead
Monday, October 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.
Wednesday, October 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.
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.
Thursday, October 6
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, October 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.
There are a few bigger reports coming out next week, but the undisputed big daddy of them all is the employment report. That really has the potential to move markets and the Federal Reserve will be keeping a close eye on it.
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